The worst-case scenario for a government shutdown
Just how bad can things get?
A government shutdown looks all but inevitable. On Sunday, House Republicans passed a second continuing resolution (CR) that asks for a one-year delay of ObamaCare's individual mandate and a repeal of a medical-devices tax.
Senate Democrats will almost certainly — like they did on Friday — strip the House bill of any language involving ObamaCare and send it back. Their argument is that this law was already passed by Congress and deemed constitutional by the Supreme Court. As a delay of the individual mandate would more or less make ObamaCare unworkable, it's unlikely Democrats would see it as just another setback, like the employer mandate that was delayed until 2015.
That means on Monday, at the stroke of midnight, the gears of government will probably grind to a halt. If that happens, 800,000 federal employees will be forced to take furloughs and others, like those in the military, will have to work for IOUs.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
But things could get really bad if this stand-off continues.
The U.S. economy, of course, hasn't completely recovered from the Great Recession — and a government shutdown would certainly not help things. Mark Zandi, chief economist at Moody's, predicts a drop in annual economic growth of 0.2 percentage points in the fourth quarter — and a 1.4-percentage point drop if this goes on for another three or four weeks.
And if the impasse continues for two months? That, Zandi tells USA Today, "would likely precipitate another recession.''
Slow economic growth and a stagnant job market have been the norm since the financial crash. The markets, however, have recovered nicely. All that could in jeopardy if Democrats and Republicans can't resolve their differences soon, writes Politico's Ben White:
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
At first, most Americans won't notice significant changes in their lives. They will still receive their Social Security and Medicare checks if the government shuts down at midnight. If it's not resolved by Nov. 1, however, checks could be delayed by two weeks — a big problem for seniors who are living month-to-month.
The doomsday scenario centers around the debt ceiling. If Congress can't agree on a budget before mid-October — when the federal government is expected to hit its borrowing limit — then the United States could default on its debt.
Should that happen, the non-economic-apocalypse-inducing approach is that the United States prioritizes some payments over others. In that case, as Matthew O'Brien notes in The Atlantic, we would see a 32 percent cut in government spending, or "mega-austerity," that would "cost us millions of jobs at an annualized pace" and take a hammer to consumer confidence.
If the U.S. government can't prioritize its debt, whether due to legal or logistical reasons, then the U.S. economy could be irretrievably damaged. Not only could we see another recession, but also higher interest rates if investors get rid of U.S. Treasuries they fear might default. That, O'Brien writes, would mean disaster:
In sum, if Congress takes a week to come to an agreement on the budget, the damage to the economy will be real, but the United States won't become Thunderdome. After that? Well, let's just say the stakes are very, very high.
Create an account with the same email registered to your subscription to unlock access.
Keith Wagstaff is a staff writer at TheWeek.com covering politics and current events. He has previously written for such publications as TIME, Details, VICE, and the Village Voice.
-
Cicada-geddon: the fungus that controls insects like 'zombies'
Under The Radar Expert says bugs will develop 'hypersexualisation' despite their genitals falling off
By Chas Newkey-Burden, The Week UK Published
-
'Voters know Biden and Trump all too well'
Instant Opinion Opinion, comment and editorials of the day
By Harold Maass, The Week US Published
-
Is the Gaza war tearing US university campuses apart?
Today's Big Question Protests at Columbia University, other institutions, pit free speech against student safety
By Joel Mathis, The Week US Published
-
Arizona court reinstates 1864 abortion ban
Speed Read The law makes all abortions illegal in the state except to save the mother's life
By Rafi Schwartz, The Week US Published
-
Trump, billions richer, is selling Bibles
Speed Read The former president is hawking a $60 "God Bless the USA Bible"
By Peter Weber, The Week US Published
-
The debate about Biden's age and mental fitness
In Depth Some critics argue Biden is too old to run again. Does the argument have merit?
By Grayson Quay Published
-
How would a second Trump presidency affect Britain?
Today's Big Question Re-election of Republican frontrunner could threaten UK security, warns former head of secret service
By Harriet Marsden, The Week UK Published
-
'Rwanda plan is less a deterrent and more a bluff'
Instant Opinion Opinion, comment and editorials of the day
By The Week UK Published
-
Henry Kissinger dies aged 100: a complicated legacy?
Talking Point Top US diplomat and Nobel Peace Prize winner remembered as both foreign policy genius and war criminal
By Harriet Marsden, The Week UK Last updated
-
Trump’s rhetoric: a shift to 'straight-up Nazi talk'
Why everyone's talking about Would-be president's sinister language is backed by an incendiary policy agenda, say commentators
By The Week UK Published
-
More covfefe: is the world ready for a second Donald Trump presidency?
Today's Big Question Republican's re-election would be a 'nightmare' scenario for Europe, Ukraine and the West
By Sorcha Bradley, The Week UK Published