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U.S. Government shutdown could have negative political and economic repercussions

The U.S. federal government is potentially less than a week away from a shutdown which could have far-reaching implications, from the political to the economic, with Congress still at an impasse for spending bills that fund government operations.
The U.S. federal government is potentially less than a week away from a shutdown which could have far-reaching implications, from the political to the economic, with Congress still at an impasse for spending bills that fund government operations. U.S. Congress so far has failed to pass any of the 12 regular spending bills to fund federal agency programs in the fiscal year starting on October 1.
A shutdown happens when Congress fails to pass some type of funding legislation that is signed into law by the president.
US government services would be disrupted and hundreds of thousands of federal workers suspended without pay if Congress fails to provide funding by October 1. The reason for the impasse lies with a feud within the Republican-controlled U.S. House of Representatives, who were due to try to advance steep spending cuts this week that stand very little chance of becoming law, bolstering the prospect of a shutdown on Sunday.  Four such shutdowns have occurred where operations were affected for more than one business day, with the most recent being in 2018-2019, which sidelined roughly 800,000 of the federal government’s 2.1 million employees for 34 days.  A U.S. government shutdown would have negative implications, both politically and economically.  Economically, a shutdown would negatively affect the U.S. government’s credit assessment as it would highlight the weakness of U.S. institutional and governance strength compared to other top-rated governments, Moody’s said on Monday.  
“A shutdown would be credit negative for the US sovereign,” the credit rating agency stated, while “a prolonged shutdown would likely be disruptive both to the US economy and financial markets.” 
Moody’s currently has a triple-A rating for the US government.  Another economic factor that could be affected by a U.S. government shutdown is GDP growth. According to Goldman Sachs, a government-wide shutdown would directly reduce GDP growth by around 0.2% per week, once private sector effects were included.  As for the political implications, Moody’s also stated that a shutdown would highlight how “political polarisation” is impacting fiscal decisions, following the political “brinkmanship” on the government’s debt ceiling earlier this year.  With just under a week before Washington runs out of money to keep the federal government fully operating, time is running out for a resolution. Past performance is not a reliable indicator of future performance.
 

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