The machinery of the US government is grinding to a halt.
As a bitter political impasse over federal spending deepens in Washington, a partial government shutdown is set to begin next week, a self-inflicted crisis that will sideline hundreds of thousands of federal workers, halt a vast array of government services, and inject a potent dose of uncertainty into the nation’s economy.
The standoff, which comes as the fiscal year is set to begin on Wednesday, was triggered by Congress’s failure to approve new spending.
While Republicans control both chambers of Congress and the White House, they have been unable to break a procedural logjam with Senate Democrats, with the core of the dispute this time centering on health care funding.
While the full impact will depend on the shutdown’s duration, the longer it goes, the worse it will get.
A market flying blind
One of the most immediate and profound consequences will be a data blackout that could leave the Federal Reserve “flying blind.”
The Bureau of Labor Statistics will shut down, delaying the release of the crucial monthly jobs report and other key inflation indicators.
This will deprive the Fed and investors of the official benchmarks they need to assess the health of the economy, a perilous situation at a time when the central bank is weighing a potential interest rate cut.
The watchdogs go dark
The nation’s key financial watchdogs will also be effectively neutered. The Securities and Exchange Commission (SEC) will be reduced to a skeletal staff of fewer than 400, a move that will halt most IPO reviews and corporate filing signoffs.
This will likely freeze the booming IPO market solid.
The Commodity Futures Trading Commission (CFTC) will also be paralyzed, retaining only a few dozen employees for the most basic oversight.
Essential services: what stays open?
Despite the widespread closures, many of the government’s most essential functions will continue, albeit under strain.
- National security: All active-duty troops will remain at their posts, though their pay could be delayed. Criminal prosecutions and investigations by the Justice Department will continue, and border and aviation security will not be affected. Embassies and consulates will stay open.
- Social safety net: Monthly Social Security payments, including retirement and disability benefits, will continue to be sent out. Food stamps and child nutrition programs will also operate temporarily on carryover funds. Hospitals and suicide prevention programs for veterans will remain open.
- Public services: Mail delivery by the U.S. Postal Service will operate as usual, as it is self-funded. The National Weather Service will continue to issue forecasts, and air traffic control will remain operational, though a prolonged shutdown could see a rise in sick days, as has happened in the past.
What grinds to a halt?
For a vast swath of the government, however, the lights will go out. The Commerce Department will halt all data collection, including the figures used to calculate GDP and inflation.
The FDA will stop accepting new drug applications, and the EPA will halt most of its permitting and enforcement actions.
NASA is slated to furlough about 80 percent of its staff, and the National Park Service will keep sites open but with only basic visitor services.
The last government shutdown, a record 35-day impasse in 2018-2019 over border wall funding, serves as a stark reminder of the deep and disruptive power of these political battles.
Now, as the nation once again teeters on the brink, the economic and social consequences of a divided Washington are about to be felt once more.
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