The Long-Term Effects of 2018/2019 Government Shutdown on the U.S. Economy and Society

It is my guess that if this government shutdown continues into winter 2018/spring 2019, it will have long-lasting, adverse effects on both the U.S. economy and its citizens. The staffing and financial impacts of such a shutdown can be significant and may take a considerable time to fully recover from.

Staffing and Financial Impacts

During the shutdown, a large number of Federal employees eligible for retirement will choose to retire, leaving a gap of experience and expertise in critical sectors. Federal contractors and small subcontractors may also become hesitant to bid on government contracts, as the risk of financial loss becomes too great. This hesitation could delay or even halt certain critical research projects, making recovery more difficult.

Economic Impact

The government shutdown affects only about 20% of the Federal workforce, yet this portion accounts for approximately 1.3% of the U.S. economy. If the shutdown persists for four weeks, the economy stands to lose over 50 basis points of economic growth. Such a significant loss could lead to lower company earnings, which might eventually be reflected in reduced stock prices. This could even contribute to the onset of another recession.

Social and Financial Consequences

As the duration of the shutdown increases, many Federal workers will need to rely on credit cards to pay their bills. While Congress may eventually vote to provide back pay, the interest accrued on this debt will not be reimbursed. This could result in some Federal workers becoming delinquent in their mortgage payments, potentially leading to foreclosure. Credit scores of affected Federal workers will likely decrease, making it harder to secure housing, mortgages, and other financial services. Additionally, lower credit scores can increase costs, such as those for cable TV and other utilities that require credit checks.

A Call for Reform

While the federal government may be closing non-essential departments, it is crucial to question the necessity of these departments. Departments such as the Department of Education, the Department of Energy, the Department of Transportation, the Environmental Protection Agency (EPA), and the Internal Revenue Service (IRS) should be evaluated. Many of these departments do not have a constitutional mandate and could potentially be left to the states or directly to the people, as per the 10th Amendment of the U.S. Constitution.

In conclusion, the government shutdown of 2018/2019 has the potential to have significant, long-lasting effects on the U.S. economy and society. It is important to address these challenges proactively and call for necessary reforms to ensure a more sustainable and resilient future.