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How will the government shutdown impact you?

Written by William Cowie - 6 Comments

Even the most passionate avoiders of news have heard: the government of the mightiest country in the world has shut down. Even the Taliban is having a field day over something that must seem really strange to them, being hardly the most devoted civil servants in the known world.

And indeed it is a strange sight, even for “civilized” countries. Do any other of them have the same problem? In a word, no. If you look at the Wikipedia website for government shutdown (and yes, there is indeed one) you learn a few quite interesting facts:

1. We do this to ourselves

It’s not Osama bin Laden, the communists, the hippies or the ghosts of Halloween doing this to us. No airplanes, bombs, chemicals, terror tactics or bags of candy are involved. The people doing this pass through TSA X-ray machines every day… and their underwear is clean. It’s us, or at least some of us, doing this to ourselves. More accurately, it’s our government, but with no help or hindrance from outsiders. Even lobbyists, the latest cadre of bad guys, seem to be sitting this one out… but of course we can never be totally sure of that, can we?

2. We are the only ones

Our leadership, the best government money can buy, according to some cynics, is the only one that imposes a debt ceiling on itself. Other countries like Japan, China, France, Britain, Germany, simply borrow what they need and carry on. Not to say they have no squabbles or disagreements among their parties and politicians, but none of them have imposed a debt ceiling on themselves which, when reached, shuts down their countries’ governments. (Well, there is one other country, Denmark, according to the Wikipedia article, that shares the dubious distinction of being creative in finding ways to shut down their government.)

3. This isn’t the first time

This is in fact the 17th time the United States Federal government has shut itself down in just a few years. In fact, since 1976, the average runs close to one government shutdown every two years or so. Okay, that includes postponements, but if you ignore those, the average still comes out not far from about once every four years.

This means we have a government imposing this phenomenon on its country, all by itself, on a regular basis. And we’re the only nation doing it.

What’s Going To Happen?

Of course, that’s the big question on everyone’s mind. As usual, there’s no shortage of questioners, or answerers, happy to fill pages and screens with their opinions. Here are a few answers you probably are not hearing:

1. Bureaucrats don’t starve

The way the shutdown was portrayed initially, it sounded like honest, hardworking bureaucrats will be furloughed without pay, through no fault of their own. It’s interesting to me that when workers at Boeing, Caterpillar or Wells Fargo get furloughed because of a recession, well, that’s bummer sad, but when government workers get furloughed for exactly the same reason (sorry, we don’t have money to pay you) somehow there’s an unspoken undertone of injustice, of innocence, and of needlessness. Why is that? Nobody else seems to have commented on that. Life happens. Did someone send a letter from heaven that government workers should be treated better than those working elsewhere?

However, in the past almost all Federal workers eventually received back pay. We have no reason to believe it will be any different this time. And so, a shutdown amounts to extra paid vacation for most affected workers, not quite the human drama portrayed in some quarters.

2. Government is not really serious about this

One of the best examples is the Department of Defense, those guardians entrusted with protecting us from all evil. Just minutes before the shutdown took effect, they pushed through about $5.5 billion of purchases (most of it classified under the conveniently vague heading of “parts”). Cynics can have a field day about that, but that’s not the best part.

While doing that, they also released a press release lamenting that, because of the shutdown, the Air Force/Navy football game would be canceled. One supposes the idea behind the announcement would have been to garner sympathy, and possibly even outrage, at the misery our government was absolutely forced to perpetrate on those it so longs to protect (and entertain).

It didn’t quite work out that way, though. A few sane people, not furloughed, pointed out that those games didn’t cost the armed forces anything. In fact, the games actually brought in money from ticket sales, $10 stadium hot dogs, and the billions of dollars Disney (through ESPN) pays all colleges to broadcast their games. In vintage bureaucrat fashion, the backpedaling was a lot quieter than the dramatic announcement. Life went on. (Navy won, 28-10.)

3. The nation discovers how little we miss the government

Traffic on the Beltway in Washington, D.C. reportedly was just as heavy after the shutdown as before. Some people are just hard to please, though. A shutdown HAS to impact the Beltway. Truck drivers, of all people, decided to step into the breach. If the government shutdown won’t close the Beltway, they will, by golly, according to the Washington Post.

Meanwhile, media members, fishing for dramatic human interest stories stemming from the shutdown are having a hard time finding any. Seems the National Parks Service, among allllllll the services our diligent government blesses us with, is the only one we we really miss. Not only are vacationers inconvenienced, but small businesses close to park entrances are being affected. But that seems to be about it. Here is the greatest country on earth, with by far the largest contingent of Pulitzer hunting media professionals money can buy, intently focused on scouring the earth for any crumb of drama, and the National Parks Service is all they can hang their hats on.

4. Investments are unaffected

Listening to some news reports, it sounded like the financial version of the end of the earth last week. “Dow crashes” screamed one headline. Not hardly. As of last Friday, the stock market didn’t seem to be moving any differently than its usual up-and-down pattern in the weeks before the shutdown.

Business Week had a video of an analyst who looked back on previous shutdowns to see if any of them had any effect on the stock market. Conclusion: if anything, the markets went up, not down, around and after the shutdowns.

The GDP, mathematically, includes the government, but it’s a small portion. Therefore, we can expect the GDP (“the economy”) for this quarter to be down by 0.x percent, where x won’t be all that large. Depending on when the politicians feel like doing their job again, that small number will be added back as all those back payments are made and all the usual purchases get made before the end of the fiscal year, so as not to lose the budget for the next year.

So the economy probably won’t be affected by the shutdown all that much. It never was in the past.

Summary

The fact that this is the seventeenth government shutdown is probably news to many. This is in stark contrast to the great stock market crashes of 1929, 1987 and 2008. We remember each one of those — we even give those days names with colors (Black Monday, for example).

The reality is that no previous government shutdown has affected the country as much as 9/11 or any of the stock market crashes. From all appearances, this one doesn’t look like it will be any different. We will still go see Gravity this weekend, still buy tickets to our favorite college football game, and still invest for the long term.

You are investing for the long term, aren’t you?

Published on October 17th, 2013 - 6 Comments
Filed under: Economy

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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6 Responses to “How will the government shutdown impact you?”

  1. 1
    Cynthia Smith Says:

    I would change only one thing in your article. We, the people of the United States, have the government that the best money will buy.

  2. 2
    jestjack Says:

    ….and this goverment shut down changed nothing. Made some headlines….saw plenty of politicians tongues a wagging…Now the thing that really floors me is that the folks sent home when the government shutdown will get their FULL pay even though they did no work. Sooo it appears the federal workers got an 18 day “paid vacation”. My thought is they were “locked out” and should certainly be entitled to unemployment…not their full pay…Just my 2 cents!

  3. 3
    Donny @ Personal Income Says:

    I am really glad that i don’t have my retirement savings stuck in an IRA or 401k account because I read stories that the government can take money from these accounts in order to start paying down on the National debt. This is just one more situation that could lead to a disaster for a lot of people who worked their entire life for their savings.

  4. 4
    Martin Says:

    I always wondered what this meant exactly. Thanks for the share, it really opened my eyes and helped inform me about the Government Shutdown.

  5. 5
    Graham Miller Says:

    This is definitely one of the most discussed topics. I believe every nation has its financial ups and downs, and from my long-term experience (aged 68), I am optimistic about our financial future :)

  6. 6
    Leigh Says:

    It is the same across the World. Everywhere all anyone is worried about is money and materialism. I remember my grandma saying when I was a kid that one day we would have to pay for our water. Now we have the fat bankers that lose millions and still get paid the fattest bonuses for closing down the banks and the people having to make handouts to bail them out. Everyone wants to sell you something that will be a good investment but if you are not in the know investments can be a challenge also. In the Uk it is unlikely by the time I retire that we will even get a government pension fund even having to pay them a fortune a month. Then we outsource everything to third world countries and raise their economy. Then then they compete against us in business and win and drive our economies down. The World really is getting harder. Just my rant I guess ;-)

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