US Government Shutdown: Economic Fallout and Political Impasse

Article Summary

• White House predicts the government shutdown could potentially end this week.
• Economic costs are mounting as many federal workers approach their first unpaid workday.
• The shutdown is impacting crucial economic data releases, such as the monthly jobs report.
• Political gridlock persists between parties on issues like healthcare.

In rapidly developing events, White House chief economic advisor Kevin Hassett stated on Monday his prediction that the government shutdown "could end sometime this week." However, Hassett added that the Trump administration might resort to "tougher measures" to force Democrats to cooperate if a resolution isn't reached. These comments come as the government shutdown enters its third week, continuing without clear signs of ending, making it the third-longest federal government shutdown in US history.

Economic repercussions are expected to escalate in the coming days. By the end of this week, a significant number of essential federal employees will face their first "unpaid workday" as a result of this shutdown. Government payroll schedules show that Friday represents the cutoff for electronic deposits for the pay cycle from October 4th to 18th.

The biggest challenge for the market so far is the so-called "data vacuum," such as the delayed release of the monthly jobs report. This deprives investors and Federal Reserve decision-makers of up-to-date information on economic developments.

However, one piece of data is scheduled to be released this week, which is the September CPI report, due out on Friday.

The government shutdown has already affected other sectors ranging from agriculture to real estate. Although the US government has taken measures to pay some government employees (from Transportation Security Administration officers to active-duty soldiers), temporarily alleviating economic pressures in these areas.

On Capitol Hill, both parties remain entrenched in their positions. Last Thursday's Senate vote marked the tenth failure of the Republican plan to pass. More votes are expected in the Senate this week.

At the core of this impasse is a struggle over healthcare. Democrats hope to extend enhanced subsidies for the Affordable Care Act, which reduce healthcare costs for Americans who benefit from these plans.

US President Trump reiterated his party's position last Sunday that he will not negotiate before the government shutdown ends, saying that Republicans "want great healthcare."

Democrats hope that another looming deadline—the health insurance open enrollment period that begins on November 1—will ultimately force Trump and other Republicans back to the negotiating table.

Hassett also said he heard from the Senate that Democrats believed voting to reopen the government was a "bad look" before the large, nationwide “March Against King” protests against Trump last weekend. He said, "The timing is potentially this week, things move fast. Moderate Democrats will step forward and get us an open government, at which point we can negotiate on whatever policies they want to negotiate under normal order."

“I think the Schumer shutdown could end sometime this week,” he said, referring to Senate Minority Leader Chuck Schumer, a New York Democrat. Republicans accuse Schumer of causing the funding shortfall.

He added, “If it doesn’t, I think the White House, along with White House budget director Vought, will have to look very closely at tougher measures that we can take to bring them to the table.”

The Trump administration is currently focused on maximizing political pressure. White House budget director Vought said the number of federal employee layoffs could eventually exceed 10,000 in the face of legal challenges. Vought also recently announced that he would "immediately pause more than $11 billion in U.S. Army Corps of Engineers projects."