4 Ways a Government Shutdown Could Affect Your Money

It’s not déjà vu. The U.S. is again barreling toward a self-imposed financial crisis.

That's right: It's government shutdown season, and lawmakers are gearing up for a bitter showdown ahead of the Sept. 30 funding deadline.

If Congress does not pass a funding package (or at least a continuing resolution that would extend the deadline), the government will shut down, and critical services will halt. Republicans are currently working on a stopgap bill that would keep the government funded through Nov. 20, but Democrats are digging in their heels.

The sticking point is expiring health care benefits for millions of Americans receiving coverage through the health insurance marketplace, aka Obamacare. By the end of the year, enhanced subsidies that reduce the cost of health insurance for many low-income Americans are set to expire unless Congress extends them or makes them permanent. The nonpartisan Congressional Budget Office estimated in May that the expiration of these subsidies could result in over 4 million people losing their health coverage.

Democratic lawmakers are saying they won't let that happen — even if it means risking a government shutdown.

“We have made clear that under no circumstances will we support a partisan Republican spending bill that continues to rip away health care from the American people,” House Democratic Leader Hakeem Jeffries, of New York, said on the floor Thursday.

On Friday, President Donald Trump said during an interview on Fox & Friends that Republicans should forge ahead without the Democrats.

“Don't even bother dealing with them,” Trump said. “We will get it through because the Republicans are sticking together for the first time in a long time.”

While that strategy may work in the U.S. House of Representatives, the GOP may need some Democratic votes in the Senate to break a potential filibuster and pass a continuing resolution, setting the stage for a prolonged battle that could, at least temporarily, shutter the government.

Even if the shutdown were short, experts say that the financial consequences can be disastrous.

“Any shutdown is a bad shutdown,” Andrew Lautz, a director of federal tax policy at the Bipartisan Policy Center, told Money in 2023. “Even if it’s a one-day shutdown.”

That's because many government operations and agencies rely on discretionary appropriations, which is money that Congress must approve ahead of each fiscal year. About 30% of all government spending is authorized by this appropriations process, according to the center, including federal workers’ salaries, some benefits, certain lending programs and more.

Without a deal, many government functions that are not “deemed essential to the protection of lives and property” could grind to a halt during a full shutdown, Lautz says.

Here are several ways a shutdown could affect your money.

1. Federal workers could be furloughed or paid late

Perhaps the most directly impacted group of people during a government shutdown are federal workers and contractors who have nothing to do with the political negotiations over spending. (Lawmakers still get paid during government shutdowns.)

According to the Department of Labor, the federal government employs almost 3 million non-military workers. On top of that are “hundreds of thousands of federal contractors whose businesses in large part depend on the federal government,” Lautz says.

When the government shuts down, almost all of them are either furloughed — which means they are told to stay home without pay — or forced to work without pay because they are classified as essential workers. A 2019 law guarantees back pay for these workers when the shutdown ends, but they are forced to make do in the meantime with no clear timeline for their next payday.

“One missed paycheck can be a missed payment on your car, a missed payment on your mortgage,” Lautz says. “It can mean going into credit card debt.”

Given the size of the federal workforce, Lautz also notes that the missed paychecks could also have a ripple effect on the local economies with a high concentration of federal workers, given that they will likely have to curtail spending throughout the shutdown.

2. Travelers could see flight delays and closed attractions

For travelers, the good news is that air traffic control and airport security continue during a shutdown, so wide-scale cancellations and delays should largely be avoided.

“But that’s not to say there aren’t potential interruptions,” Lautz says.

According to the nonprofit Committee for a Responsible Federal Budget (CRFB), some TSA agents and air traffic controllers did not report to work unpaid — even though they were supposed to — during the last government shutdown in 2019. That did cause some air travel delays, the CRFB says.

Travelers should also note that there could be unstaffed or fully closed national parks during a shutdown. Museums, galleries and zoos run by the federal government, such as the Smithsonian, may also be closed. Lautz recommends calling to confirm in advance.

3. Government benefits might be disrupted (but not Social Security payments)

Many federal benefits programs could be affected during a government shutdown, but Lautz wants to make one thing clear: “Social Security benefits will continue to flow.”

However, the actual administration of the program, including customer service and verification of eligibility, could be halted. The Social Security Administration's latest shutdown plan says it expects to keep most of its staff on the job during the potential shutdown but will likely still furlough thousands of employees.

Social Security benefits are one example of “mandatory” government spending, meaning the government is obligated to pay out these benefits even during a shutdown. Medicare and Medicaid benefits are also mandatory.

On the other hand, food benefits through SNAP, Section 8 housing assistance and veterans benefits may be cut off during a government shutdown. New loans and grants from the Small Business Administration, which help small businesses nationwide, would also freeze.

4. The release of economic data may be held up

Among the long list of agencies that are hobbled by a government shutdown are ones that monitor and report on the economy, namely the Department of Labor’s Bureau of Labor Statistics and the Bureau of Economic Analysis.

These agencies regularly release data related to the nation’s gross domestic product, unemployment rates, inflation and more. Economists, businesspeople and policymakers — especially the Federal Reserve — rely heavily on this data to make decisions.

When the data is released, the stock market reacts quickly, so investors also carefully monitor this information. Under a prolonged shutdown scenario, Lautz says the release of these crucial data could be delayed — making some investing decisions more difficult.

“I can't predict how markets would respond to a government shutdown, but one thing I can say is that markets do not like uncertainty,” Lautz says. “A government shutdown and the delay of this economic data that markets depend on could add fuel to that uncertainty fire.”

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