How can a government shutdown affect you and your money?
Parts of the federal government will soon begin to shut down unless there is an agreement on increased funding, which will have some consequences for Americans’ wallets, but not traditionally the stock market.
As of Tuesday, a handful of agencies, including the Department of Agriculture, are scheduled to be partially closed Saturday morning as congressional leaders remain over a spending deal. The remaining institutions, including the Ministry of Defense, are scheduled to be partially closed after March 8.
Here’s a quick guide to what to expect this week and beyond:
How will Saturday morning affect you?
Funding for the Departments of Agriculture, Energy, Housing and Urban Development, Transportation and Veterans Affairs expires at 12:01 a.m. Saturday.
Before the previous closure threat, the Department of Housing and Urban Development said nearly all fair housing activities would be halted while funding was cut off. The agency’s emergency plan says it has limited staff and could experience delays in processing FHA-insured loans.
Air traffic controllers will continue to work but will not be paid.
And for people who rely on the Supplemental Nutrition Assistance Program (SNAP), the clock may start ticking, notes the Committee for a Responsible Federal Budget, a bipartisan group in Washington.
“Funding for the SNAP program is essential, but our ability to send out ‘food stamp’ benefits may be affected by the closure. The continuing resolution generally authorizes the USDA to send out benefits for 30 days after the closure. It begins,” says CRFB.
A USDA shutdown would also “block critical lending to American farmers, threatening to raise food prices for all Americans,” Senate Majority Leader Charles Schumer, a New York Democrat, said in a letter to colleagues on Sunday.
What will be closed after March 8?
The risk of lockdown increases from Saturday 9 March.
By then, more agencies will be affected, including the Department of Defense, Department of Homeland Security, and the Securities and Exchange Commission.
There are risks for companies seeking to go public. Last September, as the federal government faced the threat of another shutdown, Securities and Exchange Commission Chairman Gary Gensler told his House panel that mistakes would result in more than 90% of his staff being laid off and the IPO’s failure to occur. They said it would be discontinued.
And while American soldiers continue to serve, they will go without pay.
“What affects people who are not receiving a paycheck is how and when they can buy groceries, child care, etc.,” Pentagon spokeswoman Sabrina Singh told reporters in September.
The second deadline comes a day after President Joe Biden is scheduled to deliver his State of the Union address, potentially heightening the drama surrounding the financing deal.
How did the shutdown affect the stock market?
While the shutdown will be disruptive for people who rely on government services, investors may not be harmed.
As MarketWatch previously reported, since 1978 there have been six government shutdowns that lasted more than five days, and the S&P 500 SPX index rose in the four most recent instances.
A partial shutdown lasting less than a week “should be an unusual event for the market,” Tobin Marcus of Wolfe Research said in a note.
What services will continue once the service ends?
Americans will still receive letters and packages through the U.S. Postal Service. That’s because the Post Office is an independent agency that is not funded by taxes and will continue to operate even if it closes.
As CRFB notes, Social Security and Medicare checks will continue to be sent during the shutdown, but card issuance will stop and benefit checks will also stop.
The source of funds for Social Security payments is the program’s trust fund and is not part of the annual government budget cycle.
What’s next?
The House returns to Washington on Wednesday, giving lawmakers just three days to avoid the first shutdown.
Biden and Vice President Kamala Harris met with four congressional leaders on Tuesday, and all four leaders expressed optimism about avoiding a shutdown following a meeting that addressed aid to Israel and Ukraine.
Senate Republican Leader Mitch McConnell of Kentucky said preventing a shutdown is “something we can all agree on.”
In addition to McConnell, Biden and Harris met with Schumer, House Speaker Mike Johnson, a Louisiana Republican, and House Minority Leader Hakeem Jeffries, a New York Democrat.
