Are We Facing a Government Shutdown?

With the possibility of a government shutdown looming we're sure you might have some questions about why it might happen and what that means for you.

The potential government shutdown in the United States is looming as September comes to a close. The federal fiscal year starts on October 1, and normally, Congress should pass 12 appropriations bills to fund various government sectors by that date. However, this rarely happens on time, with only one bill related to military construction and veterans affairs passed so far this year.

To avoid a government shutdown, Congress often resorts to passing continuing resolutions, which extend current spending levels until a new budget is agreed upon. These resolutions are typically temporary measures, and it often takes several months for the final spending bill to become law.

The current situation in Congress is complicated because the House of Representatives and the Senate are controlled by different parties. The Senate has proposed bipartisan legislation to maintain current funding until November 17, but it remains uncertain how the House will respond.

The consequences of a government shutdown depend on its duration. While essential services like mail delivery, Social Security, and interest payments on U.S. Treasury bonds continue, programs like the Supplemental Nutrition Program for Women, Infants, and Children could be immediately affected. Federal workers may be furloughed or required to work without pay, and contractors may not receive compensation. Air travel and various federal services could also experience disruptions.

In the long term, the economic impact of a shutdown may be relatively benign, with lost payments eventually recovered once spending is authorized. However, lost productivity and potential harm to consumer and investor sentiment could have consequences. The stock market's reaction to previous shutdowns has been mixed.

It is advised to maintain financial stability during this uncertain period and stay informed about the status of federal agencies and services that may directly affect individuals.

If you would like to speak with someone for more information on the possible government shutdown please reach out to me or anyone with our Wealth Management and Trust team.

David Cover, AIF®
Chief Wealth Management & Trust Officer