Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

U.S. Government Shutdown

“U.S. government shutdown” refers to a situation in which the U.S. government stops providing non-essential services to the taxpayers; for example, national parks and museums close their doors. The reason for this is a lack of available funding. A government shutdown is nothing new to the U.S. economy. There have been many instances when the U.S. government temporarily stopped providing non-essential services, but then shortly after, they were resumed. Past government shutdowns, in general, weren’t severe–the shutdowns didn’t last long. The longest U.S. government shutdown was during President Bill Clinton’s period, and it lasted 21 days.

First Government Shutdown in 17 Years. If Only It Will Last?

By for Profit Confidential

U.S. government shut downAt the very core, this U.S. government shutdown means that about one million federal employees will be told to go home without pay. Non-essential services will be stopped until further notice. This will be mainly due to a lack of funds. (Source: Committee for a Responsible Federal Budget, September 24, 2013.) National parks will be closed; museums will be shut along with many other services.

What government services will be available? Social security and the Medicare payments will be sent out to those who already rely on it. For those who are applying for it during the U.S. government shutdown, they will not have their applications processed for the time being.

As bad as all of this may sound, this U.S. government shutdown isn’t the first one we’ve seen. Since 1976, there have been 17 instances when the U.S. government wasn’t able to come to a decision on funding. Mind you, many U.S. government shutdowns only lasted over the weekend, so their effects were minimal. The last two long U.S. government shutdowns were 17 years ago and they lasted a total of 27 days. (Source: Ibid.)

With all this, there are many different opinions. With so many people sent home, the U.S. government shutdown is an immediate money-saver. But on the other hand, those who aren’t getting paid are likely pulling back on spending and that will affect gross domestic product (GDP) growth for the U.S. economy.

As all this happens, I stay far away from making political predictions, as after all, that’s all we are dealing with here—two political parties pitted against each other resulting in a U.S. government … Read More

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