It’s the question of the day: Will Congress pass the short-term spending bill by its midnight Friday deadline, or will the federal government temporarily shutdown?
No one can say for sure—analysts say the chance of a shutdown ranges anywhere from 20 to 65%.
But it may be easier to gauge what might happen should a shutdown occur. Analysts need only look back to the October 2013 event for clues of what may unfold.
For starters, during a government shutdown, federal employees in the executive, legislative, and judicial branches are potentially eligible for unpaid leave, leaving some “essential” workers still in the system. Social security checks, for example, are expected to remain unaffected.
The approximately two-week shutdown in 2013 did, however, leave a modest mark on the U.S. economy, with GDP down slightly during that quarter as a result of unpaid workers spending less. Also, some $4 billion in tax refunds were delayed as a result of furloughed workers in the Internal Revenue Service, with the Office of Management and Budget saying the shutdown cost taxpayers some $2 billion in lost productivity. National parks alone lost some $500 million in revenue, as they, too, shut their gates during the 16-day shutdown.
The shutdown also impacted drug companies with the Food and Drug Administration delaying approval of medical devices and drugs. Investors also lost out on their regular doses of economic data which are often used to buy stocks or price goods. During the shutdown, federal agencies did not report the jobs numbers or consumer price index, among other data sets.
Notably, following the 2013 shutdown, the government passed a bill to retroactively pay its workers for the time lost.
Fast forward to this year, and another potential shutdown may be hours away. Here’s what analysts have to say regarding the current situation:
Evercore ISI analyst Dennis DeBusschere noted that while global stocks are trending higher, the threat of a shutdown is weighing on the U.S. dollar:
In the U.S, the Dow Jones Industrial Average is trading largely flat, while the S&P 500 nudged up 0.22%.
A shutdown could also have longer-term negative effects on the U.S. economy. Height Analytics’ Stefanie Miller, who sees a 65% chance of Congress entering such a state again, pointed to the last shutdown in 2013 in which many furloughed federal employees stopped spending.
Indeed, when tallying up the impact of the 2013 shutdown, President Barack Obama’s administration noted those same figures, adding that it may even be worse than estimated.
Goldman Sachs analyst Alec Phillips said he anticipates a 35% chance of a shutdown—though he believes a short-term extension is more likely.
Horizon’s Chief Global Strategist Greg Valliere, meanwhile, noted that the real stakes lie in the politics in Washington, D.C.
He also noted that much of the government will continue operating despite the shutdown:
All eyes are on the Senate to see what will transpire, now that the House has already passed a short-term spending bill.