:max_bytes(150000):strip_icc()/GettyImages-2244873433-4f96ad2a5b3c451b8a2b259a3d4d7608.jpg "How The Next Government Shutdown Could Be Different From The Last")
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Key Takeaways
- The government is at risk of shutting down again on Friday after Democrats threatened to vote down funding bills.
- Senate Minority Leader Chuck Schumer said his party would vote against funding bills that gave money to the Department of Homeland Security, after a shooting involving federal agents over the weekend.
- A second government disruption on the heels of the record 43-day shutdown in the fall could disrupt the economy and economic data collection by the government’s statistical agencies.
Suddenly, the government appears just days away from a shutdown.
The risk of another shutdown rose over the weekend amid the political fallout from a fatal shooting in Minneapolis by federal agents during protests over immigration enforcement efforts.
Senate Minority Leader Chuck Schumer said Democrats would oppose a government funding bill that includes money for the Department of Homeland Security, which oversees Customs and Border Protection and Immigration and Customs Enforcement. Democrats have cited concerns about federal enforcement practices, while Republicans argue that DHS funding is necessary to maintain border security and government operations.
“Senate Democrats will not provide the votes to proceed to the appropriations bill if the DHS funding bill is included,” Schumer said in a statement.
What This Means For The Economy
A second government shutdown in less than three months could hurt the economy by again delaying paychecks to federal workers and stopping important government services among other disruptions.
If the bill to fund the government does not get through Congress by Friday, many federal agencies would once again shut down. Odds of a compromise solution seemed slim Monday, especially because the House of Representatives is currently in recess and not scheduled to return until Feb. 2.
As of Monday, betting markets were pricing in high chances of a shutdown. The odds of another shutdown in January surged to 80% on betting site Polymarket, up from 9% on Friday.
Economists and analysts are also bracing for a shutdown.
“If we were having this conversation a week ago, I would have said the government is probably going to stay open,” said Stifel’s Chief Washington Policy Strategist Brian Gardner in an interview on CNBC Monday. “But the weekend changed the dynamics. I think we have to see how it plays out over the week….But a partial shutdown does seem to be the base case at this point.”
Unlike the last shutdown in October and November, several key departments would remain open, including the Department of Agriculture and the Department of the Interior, since funding bills for those agencies have already passed with bipartisan support.
However, many government agencies that closed during the last shutdown would once again shutter, including the Bureau of Labor Statistics, which publishes key economic data on inflation and the job market. The agencies potentially affected by the second shutdown account for 90% of the government’s discretionary spending, according to economists at Wells Fargo Securities.
Like the last shutdown, the next one could have a significant effect on the economy and household finances as government services halt and federal employees are sent home. The record-setting 43-day shutdown in October and November, caused by a dispute over health care funding, temporarily pushed up unemployment, likely slowed down economic growth, and delayed or distorted important economic data.
