How a Government Shutdown Could Affect the Economy
Published On Dec 20, 2024, 4:36 PM
The article discusses the potential economic impact of a federal government shutdown, which appears likely unless Congress reaches a funding deal by the upcoming deadline. While the shutdown may not significantly disrupt the economy, as it will not affect essential government services like Social Security and Medicare, it could create uncertainty in the economic outlook. A temporary shutdown could reduce quarterly economic growth by around 0.15 percentage points for each week it lasts. While federal workers will eventually receive back pay, a prolonged shutdown could have serious financial implications for those living paycheck to paycheck.
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The uncertainty surrounding the potential government shutdown could lead to cautious behavior among investors and consumers. While the overall economy may not be severely affected, the sentiment change could impact market performance for sectors reliant on consumer spending and federal contracts.
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Some government services American rely upon will be unaffected by a shutdown while others would become more difficult to access or suspended altogether. The effect on the economy may depend on how long any stoppage lasts.