How Government Shutdowns Inpact the Economy: Lessons from History

Once again, a government shutdown is looming even though House Speaker Kevin McCarthy and President Biden made an agreement earlier this year that was supposed to prevent this exact outcome

Xiaodong Fang

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“A government shutdown would disrupt the U.S. economy and the lives of millions of Americans who work for the government or rely on federal services.”

AP News

A government shutdown occurs when Congress fails to pass spending bills before the start of a new fiscal year, which is October 1st. If Congress fails to act before the end of September, then there will be a lapse in funding and all nonessential government functions must stop.

Photo by Andy Feliciotti on Unsplash

Government shutdowns have been a recurrent issue in the United States’ political landscape, and their impact on the economy has been a subject of considerable debate and analysis. Throughout history, these shutdowns have taken various forms and durations, each leaving its own unique imprint on the economic landscape.

Delving into history, let us explore the consequences of some key government shutdowns on the economy, and look into the complex relationship between government dysfunction and economic health and the broader implications for economic stability, growth, and public trust.

Government Shutdowns: An Overview

Before delving into specific historical examples, it’s essential to establish what government shutdowns entail. A government shutdown occurs when the legislative branch of a government fails to pass a budget or appropriation bills, leading to a lack of funding for government agencies and their operations. Consequently, non-essential government functions are temporarily suspended, and federal employees may be furloughed or work without pay until the budgetary issues are resolved.

Government shutdowns are not unique to the United States; they have occurred in various countries worldwide. However, the U.S. experience is of particular interest due to its frequency and the country’s role as a global economic powerhouse. Furthermore, the U.S. government shutdowns often…

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Xiaodong Fang

Political Scientist studied and worked at #Georgetown #IowaState #JamesMadison | Observing #Elections and #China