The first U.S. federal government shutdown in 17 years went into effect today, with as many as half of federal employees being furloughed or put on indefinite leave. Though most of the 17 federal shutdowns in U.S. history have lasted less than 3 days, the most recent shutdown in 1995, lasted for 3 weeks, and the current deadlock in congress has warranted concerns that this shutdown could last even longer.
The Cost to The Economy
Bank of America Merrill Corp has projected that the federal government remaining closed for two weeks would cut their fourth-quarter estimate of economic growth by 0.5 percent. A memo from Ethan Harris, an economist with Global Economics Research, placed the drop in Q4 outlook at 2 percent, if the shutdown remains in effect for a month.
A report from IHS Global Insight estimates a cost of $300 million to the economy for every day the federal government is shutdown. Though, this is a relatively small sum compared to the United States' $15.7 trillion GDP, the shutdown could have a further reaching impact on the economy, in some cases, in unexpected ways.
The Impact on Federal Workers
Most economists have estimated that 800,000 to 1 million federal employees will go without a paycheck, until the deadlock in Washington comes to an end. Though federal workers were repaid after the last government shutdown in 1995, it's unclear how long the current situation in congress could last, or how long and how many, employees will have to go without pay.
According to statistics from The U.S. Census Bureau and The Federal Reserve, 1 in 4 american families have no savings at all, and the average savings of those families that do is less than 10 percent of their annual household income. This means, even for those federal workers who do have savings, most will be struggling to pay their bills if the shutdown lasts for more than a month.
Payday Loans to Make Ends Meet
The federal government is the single largest employer in the United States, with over 2.1 million people on it's payroll. With nearly half of these workers being furloughed, a considerable strain will be placed on these households, dependent upon a government paycheck to balance their budgets. A temporary loss of income is among the most common situations necessitating the payday lending industry. Though some states have instituted rate caps on short term loans, many borrowers simply turn to online payday loans or alternative forms of short-term credit, not affected by these state regulations.
In the end, while the economy as a whole will almost certainly take a negative hit as a result of the shutdown, there are still some corners of the economy that could stand to make a tidy profit from this fiscal turbulence.