The US government’s machinery is coming to a grinding halt.
A partial shutdown of the government is scheduled to start next week as a result of a political impasse in Washington over spending. This self-inflicted disaster will affect hundreds of thousands federal employees, stop a wide range of government services and add a powerful dose of uncertainty to the economy.
Congress failed to pass new spending, resulting in the standoff that began on Wednesday as fiscal year was set to start.
The Republicans, who control the White House and both chambers in Congress, have not been able to resolve a dispute with Senate Democrats over funding for health care.
The longer the shutdown lasts, the more severe the impact.
A market flying blind
A data blackout could have profound and immediate consequences, leaving the Federal Reserve in the dark.
This shutdown will delay the publication of important monthly reports on employment and inflation.
The Fed will be deprived of official benchmarks that they can use to gauge the state of the economy. This is dangerous at a moment when the Fed considers a possible interest rate reduction.
Watchdogs are dark
Financial watchdogs in the United States will be left virtually untouched. Securities and Exchange Commission will reduce its staff to less than 400. This will stop most IPOs and sign-offs for corporate filings.
The booming IPO industry will be frozen solid.
Commodity Futures Trading Commission will be similarly paralyzed. Only a handful of employees are left to provide the most basic supervision.
What services are essential?
Many of the most important functions within the government will still be carried out, even if they are under pressure.
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National Security: All troops on active duty will continue to serve at their post, but their pay may be delayed. The Justice Department’s criminal prosecutions and investigation will continue. Border and aviation security and the Justice Department won’t be affected. The embassy and consulates are open.
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Safety net for social security: Payments of Social Security, such as retirement and disability benefits will continue to arrive each month. Temporarily, funds from carryovers will be used to operate the food stamps program and programs for child nutrition. The Veterans Hospitals, as well as the suicide prevention program for veterans and other programs will continue to operate.
- Services publics: Delivery of mail by the U.S. Postal Service is continuing to operate normally, since it’s self-funded. National Weather Service forecasts will be issued, and air traffic will continue as usual. However, a long-term shutdown may lead to an increase in sick leave.
What comes to a grinding halt?
But for a large part of government the power will be cut. Commerce Department is stopping all data collection including figures that are used for GDP and inflation.
The FDA will cease accepting new drug application, and most of the EPA’s permitting and enforcement activities will be halted.
NASA will furlough around 80 percent of their staff. The National Park Service, on the other hand, plans to keep its sites open with basic visitor services.
Last year’s government shutdown – a 35-day record impasse over funding for border walls – served as a reminder of how powerful and destructive these political fights can be.
As the country once again hovers on the edge of disaster, Washington’s economic and social effects are set to become apparent once more.
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