What would be the economic consequences of a “shutdown”?

The American Senate, with a Democratic majority, could not adopt the budgetary text and thus paralyze the country. 870,000 civil servants could be made redundant and growth could be reduced by 0.2 points of GDP.

After marking his opposition to a budget agreement negotiated in the American Congress, Donald Trump gave his approval on Thursday to a new version proposed by the Republicans, making it possible to consider the possibility of avoiding a paralysis of the federal state before Christmas.

But in the event of non-adoption by the American Senate, predominantly Democratic, before Friday midnight, the United States will experience a partial “shutdown”, that is to say the closure of certain public services, which will disrupt the functioning of many sectors. .

Who will be affected?

If no agreement is reached by Friday, many civil servants will find themselves unemployed, or “875,000 workers” according to Shai Akabas, expert at the Bipartisan Policy Center in Washington. “1.4 million” people “would continue to work as they are considered to provide essential services,” such as air traffic control and policing.

Civil servants will receive their salaries at the end of the “shutdown”, according to Bernard Yaros of Oxford Economics. A shutdown “would force hundreds of thousands of federal employees, (…) to work during the holiday season without receiving a salary,” warned the Federal Government Employees Union (AFGE) in a press release published Thursday.

“This can cause major financial disruption for households where one member works for the federal government,” said Shai Akabas.

During the paralysis of 2013 and early 2018, “around 850,000 of the 2.1 million federal employees (excluding the postal service) were placed on technical unemployment”, recalls the Committee for a Responsible Federal Budget (CFRB), a bipartisan organization.

What consequences?

Each ministry or agency establishes its own plan in the event of a “shutdown” but essential services – such as border protection, hospital medical care, maintaining order or even maintenance of the electricity network – continue to operate.

Previous times, expenditures linked to pensions as well as the health of low-income and elderly people (Medicare and Medicaid programs) had also been maintained, but registration requests had been postponed, underlines the CFRB.

National parks could also be affected, the “rangers” who take care of them being federal civil servants. In 2013, more than 400 parks were closed in the country, with the loss of revenue estimated at $500 million. In 2018-2019, however, the majority of parks remained open without offering services to visitors, but damage was reported and trash cans were overflowing.

For how long?

The duration of a possible “shutdown” remains unknown for the moment, but Bernard Yaros estimates that it could extend up to two weeks, i.e. a usual pay period in the United States.

“Pressure to resume government operations would quickly mount as federal employees lose their paychecks and worry they won’t be able to receive another one,” he added. The longest shutdown in US history lasted 34 days, in December 2018 and January 2019, under the presidency of Donald Trump.

What economic impact?

“Shutdowns have been shown to have an impact on the US economy, reducing growth by around 0.2 percentage points once the effects on the private sector are taken into account, explained Thibault Denamiel, researcher at the American think tank Center for strategic and international studies (CSIS).

“The simple fact of having to prepare for a “shutdown” entails costs”, particularly for “the taxpayer”, underlined Shai Akabas. Markets aren’t typically hit hard by a shutdown, but analysts might wonder if it’s a warning sign from the new administration, added David Wessel of the Brookings Institution.