The US government looks it’s headed for a shutdown as policymakers reach an impasse on the nation’s budget for the next fiscal year. But the stock market’s top strategists aren’t much fazed by that possibility and there’s a high chance investors could come out of the situation doing just fine, experts say.
The White House has begun advising federal agencies to prepare for a government shutdown as Republican lawmakers have shown no signs of progress in negotiations to keep the government funded beyond this week.
To avoid a shutdown, Congress needs to pass all 12 of its spending bills for the next fiscal year by September 30, something it’s historically been quite bad at.
The United States has experienced 21 gaps in government funding since 1976, leading to varying degrees of disruption. Under a worst-case scenario, the White House is warily eyeing a repeat of 2018, the longest and most recent shutdown, which sidelined roughly 800,000 of the federal government’s 2.1 million employees for 34 days.
A government shutdown amounts to a suspension of many government operations until Congress acts to restore funding. The last government shutdown, which was the longest-ever, lasted for 35 days.
For hundreds of thousands of federal employees, that means either being furloughed while the government is closed, or continuing to work without pay.
For the public, that typically means dealing with interruptions to a variety of government services. The White House has already spotlighted several government programs that could cause more severe issues if suspended, in particular the nutrition and immunization assistance given out through the Special Supplemental Nutrition Program for Women, Infants and Children.
Closures of national parks and museums are often one of the most visible impacts of a shutdown for the public, as well. In some cases, they can produce significant losses for the communities that depend on tourism.
The inspections of chemical factories, power plants and water treatment plants will be halted as the Environmental Protection Agency will furlough thousands of workers. The Food and Drug Administration will also pause routine food safety inspections of seafood, fruits and vegetables, putting extra pressure on restaurants and grocers.
Many government labs and research projects will also remain closed during prolonged shutdowns, hampering scientific work.
Agencies whose employees carry out critical services do not suspend operations. That includes a large number of federal prosecutors and investigators, postal workers and Transportation Security Administration employees.
Most of those employees will continue to work without pay until funding is restored. Benefits such as Medicare and Social Security also continue uninterrupted because they are authorized by Congress in separate laws that do not need to be renewed every year.
U.S. government shutdown looming at the end of the month would also effect border security, local officials in border towns are worried that staff shortages among federal workers would make it harder to stop criminal activity and process an influx of migrants.
Though a shutdown might not be a significant drag on the market, analysts are concerned it could exacerbate other factors weighing on the US economy in the coming quarter That includes a weakening labor market, rising interest rates, and the resumption of student loan payments, which could pinch American consumers and hike the chances of a downturn.
