Congress Has Just a Week to Avoid a Government Shutdown

A government shutdown may be coming. It would be catastrophic. Here’s what it would it look like if it really goes down.

(Photo Credit: Harold Mendoza/Unsplash)
(Photo Credit: Harold Mendoza/Unsplash)

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The government has shut down 21 times since Congress introduced the federal budget process in the 1970s, and if concessions aren’t made, we could hit 22 by this time next week.

That would be catastrophic and it’s probably not going to happen. But what would it look like if it really goes down?

Shut it Down

Sometimes referred to as a “funding gap,” a government shutdown follows the inability — or refusal — of Congress to agree on appropriations for federal spending. When that happens, federal agencies are essentially “shut down,” and must stop all non-essential work and pause the paychecks for affected government employees.

Nearly two-thirds of government employees are deemed essential, so while a shutdown excludes programs like Social Security or the US Postal Service, it would still hit millions of workers in sectors including the military, the White House, financial regulation, and health and science research.

But what about the larger economy? Let’s just say the timing isn’t great:

  • Goldman Sachs said in a recent report that the US is likely on the brink of a “Q4 pothole,” created by resumed student loan payments, an auto workers strike, as well as the potential government shutdown. “Those three things together, we think, take [GDP] growth from probably a little bit more than 3% in Q3 to around 1% in Q4,” Alec Phillips of Goldman told CNBC.
  • The potential shutdown could cost the US economy as much as $6 billion a week, Gregory Daco of EY-Parthenon told The Washington Post, and while much of that will be recouped in federal wages and program spending as and when the government reboots, the unknowns could bleed into the open market. “There are so many uncertainties and risks on the horizon, and added together, they are going to weigh down consumers’ ability to spend,” Daco said. “That could leave a visible mark on the economy.”

What’s the holdup? The shutdown hinges on a group of Republican holdouts who won’t sign onto a $24 billion spending package for Ukraine’s war efforts. Since Russia invaded the country in February 2022, the US has provided more than $100 billion to Ukraine, the highest amount of any nation. Nearly 30 members of Congress, led by Sen. J.D. Vance of Ohio and Rep. Chip Roy of Texas questioned how well the money has been spent. “Are the Ukrainians any closer to victory than they were 6 months ago?” the dissenters asked in a letter to the US Office of Management and Budget. Something tells us that Kevin McCarthy, who needed 15 rounds of voting before getting elected Speaker of the House, might have trouble mobilizing the forces needed to avoid a shutdown by Sunday’s deadline.