There's no reason to fear a shutdown
With the funding authorization set to expire at 12:01 a.m. on Saturday, Dec. 21, the U.S. economy will hardly notice if the federal government has to shut down.
of Five weeks of closure starting at the end of 2018 The government shutdown, which was extended until January 2019, is considered the costliest in U.S. history. The election lasted 35 days, from December 22, 2018, to January 25, 2019, as Democrats resisted President Donald Trump's attempt to secure $5.7 billion in funding for a border wall.
Approximately 800,000 federal employees were furloughed or required to work without pay. around it Federal discretionary spending is $18 billion Delays in compensation or purchase of services or products.
The Congressional Budget Office (CBO) said the shutdown Production losses cost the economy approximately $11 billion.comprised $3 billion in the fourth quarter of 2018 and $8 billion in the first quarter of 2019. But much of the lost output was recovered because the economy grew quickly after the shutdown, just as economies typically grow at a faster pace after a recession. -Normal deployment. CBO estimated that: Only $3 billion of gross domestic product was permanently lost.
While $3 billion sounds like a lot of money, it must be considered in the context of the total economic output of the United States. GDP in 2019 was $21.4 trillion. A $3 billion production loss means the economy is 0.014% smaller than it should be, which isn't even a rounding error from zero. This means that not even one day's worth of economic output was lost during the five-week shutdown period. I lost a little less Economic output for 1 hour and 15 minutes.
Even that may be overestimating the costs of closure. The shutdown could slow growth in government spending, leading to higher output if government resources are used more efficiently. Businesses and individuals may find that Another way to meet your needs It has the potential to foster innovation and new efficiencies during the shutdown. Because the costs are so small, it doesn't take much efficiency improvement to tip the balance in positive territory.
Shutdowns until the next Congress are short and inexpensive.
A government shutdown due to collapse of support for continued funding legislation is highly likely it will be short lived. The next Congress could take a different approach in early January. The new Congress will open on January 3, 2025, with Republicans holding a majority in both houses. Any shutdown that lasts until then is likely to have no measurable impact on the economy.
What if the shutdown continues until President Trump takes office on January 20th? In that case, the magnitude of the damage to the economy will be Similar to what was seen in the last shutdown. In fact, costs may be a little higher this time around, simply because the government accounts for a larger share of gross domestic product. In 2019, government spending was approximately 21% of GDP. This year it will be about 23.4%.
A reduction in demand due to non-payment of government salaries, even if temporary, can have beneficial effects such as: slowing inflationwhich is stubborn and the Federal Reserve expects it to rise a little next year. This is only temporary, and demand will likely return once the shutdown ends and the government sends large checks to people in slush funds, but it also gives the economy a breather and supplies to supplement the expected economic recovery. may expand. President Trump's pro-growth policies will be given more time to ramp up production.
Political cynics might even note this fact: Economic damage will occur almost exclusively during President Joe Biden's lame duck period;and a return to faster-than-normal growth will occur in the early months of Trump's presidency. That would be the sob ending to Bidennomics.
The 2018-2019 shutdown was certainly not bad for investors. The S&P rose 10.3% during the last shutdown. During the 16-day shutdown in 2013, the S&P 500 index rose about 3.1%. If you need anything, The market seems to prefer closure..
In any case, the impact on the economy is likely to be so minor as not to be a problem. Indeed, lawmakers considering whether to vote for a bill or shut down the government need not worry about how this will affect jobs, wages, and growth. It will be okay economically Even if the government is shut down until President Trump is sworn in for a second term.
