Recently, it looked as if the U.S. government would shut down temporarily as Congress was unable to agree to a funding bill. The crisis in early October 2023 was averted, but temporarily — the government could still shut down in November (and, by the time you read this, it may have, or Congress may have come to another agreement to prevent it).
The government has shut down before. The last time, before 2023, that it happened, was during the Trump administration, when the government shut down for more than a month in late 2018 and early 2019. The government’s inability to get a handle on its funding issues has had consequences, such as rating agencies downgrading the U.S.’s credit.
While we’ve had shutdowns before, and we’ll have them again, it doesn’t mean that there isn’t collateral damage in the meantime. When the government shuts down, millions of workers are either laid off (temporarily) or furloughed, so a lot of people go without paychecks while waiting for things to get sorted out. Government agencies that work with or help out small businesses are restricted in what they can do, too, and it may be more difficult to get certain loans for a home if they’re backed by the government.
Government Shutdowns and Costs to Taxpayers
In short, a government shutdown can have wide-ranging effects on everyone in the country, even if they’re not obvious. And, interestingly enough, government shutdowns may actually end up costing taxpayers more in the long run, even though it seems like they could or should save money. According to the Committee for a Responsible Federal Budget:
“While estimates vary widely, evidence suggests that shutdowns tend to cost – not save – money for several reasons. For one, putting contingency plans in place has a real cost. In addition, many user fees and other charges are not collected during a shutdown, and federal contractors sometimes include premiums in their bids to account for uncertainty in being paid. While many federal employees are forced to be idle during a shutdown, they have historically received and are now guaranteed back pay, negating much of those potential savings.”
Further:
Shutdowns also carry a cost to the economy. The Congressional Budget Office (CBO) estimated that the 2018-2019 shutdown reduced Gross Domestic Product (GDP) by a total of $11 billion, including $3 billion that will never be recovered. On top of that effect, CBO notes that longer shutdowns negatively affect private-sector investment and hiring decisions as businesses cannot obtain federal permits and certifications or access federal loans. A 2019 Senate report found that the three government shutdowns in 2013, 2018, and 2019 cost taxpayers nearly $4 billion.
Government Shutdowns and Personal Finances
Given that each shutdown is unique in its own right, it’s hard to say for certain how any single individual would be affected by one—financially speaking. As mentioned, if you work for the government or perhaps a government contractor, you could be furloughed or miss some paychecks.
So, it’s possible that you could see your income reduced or cut off for a period of time.
There are also federal benefits at play, and people could lose access to them during a shutdown. That could include SNAP and WIC benefits—the former is commonly called “food stamps,” and WIC is a program for low-income women and children—along with housing vouchers, and even veterans benefits.
Again, it depends on the specific shutdown, but there are a lot of things that could get upended, and Americans of all stripes could end up feeling the pain in their wallets.
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