What Are The Unintended Consequences Of A Government Shutdown?

Tyler Durden's picture

When it comes to the intended consequences of a goverment shutdown, they are rather simple: a shut down government (which to many is the best news possible). So what about the unintended consequences? Here is Bank of America with a quick summary of what would begin to happen at 12:01 am tonight, and continue for the duration of the shutdown.

What are the unintended consequences of a shutdown?


The shutdown will likely add to the budget deficit. It is costly to stop and start programs. The 1995-96 shutdown directly added $1.4 bn to the deficit (about $2.5 bn in today’s dollars) Moreover, the shock to growth will undercut tax revenues. In addition, ironically it does not impact the implementation of Obamacare since it is an entitlement similar to Medicare. However, there is some chance it could delay US economic data releases: in 1996, the December employment report was delayed two weeks as a result of the shutdown then. The Federal Reserve and the Post Office, both of which do not depend on Congressional appropriations, will not see any cutbacks due to a shutdown.

So for those asking if daily POMO will continue, the answer is a resounding "yes" - the government may be shut down but the wealth effect (to the 0.01%) will continue. Furthermore, it goes without saying that this is a very limited list, as nobody can truly predict what is unintended, or unpredictable (just ask money markets in the aftermath of the Lehman bankruptcy). For the full impact of intended consequences and otherwise, empirical observations will be the best gauge.

Finally, in terms of what is known about the shutdown's impact, here again is BofA, whose core observation, that "market pressure" (i.e. a selloff) will "hopefully spark an agreement" is 100% correct.

Should we have a shutdown, we would expect it would be relatively short — public uproar and market pressure will hopefully spark an agreement. A shutdown of a few days would likely have no real measurable effect upon the economy and result in only a small sell-off in the markets. Most of the federal government will keep running in the event of a shutdown, but a significant number of federal employees will be furloughed without pay, perhaps as many as one million. The impact on 4Q GDP growth should rise with the length of the shutdown: a coupleday shutdown would likely have zero net impact upon growth; a two-week shutdown could shave 0.5pp, while a one-month shutdown could lop 2pp from 4Q growth. These are, of course, rough estimates and subject to big standard errors.


The key source of uncertainty is the impact on consumer and business confidence. The revised GDP data showed very weak growth in 4Q 2012 and 1Q 2013 around the fiscal cliff negotiations, which in large part reflects heightened uncertainty. This time around, the hit to confidence and the markets could be larger still if a protracted shutdown signals the potential for an unmanaged process after the debt ceiling is breached. Lingering uncertainty — let alone a fiscal accident — would raise the chances that the Fed does not taper until next year.

And as is well known, we can't have any tampering with the New Normal prerogative #1: preserving confidence at all costs.

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Patriot Eke's picture

We have less of our property stolen?

ZippyBananaPants's picture

Who gives a rat's ass?


Tell us how we can make $$$$ like the big guys?

EnslavethechildrenforBen's picture

Zippybananapants if you get on your knees and open your mouth...

Boris Alatovkrap's picture

You are recommend to prayer?!... What god are you pray for money?

EnslavethechildrenforBen's picture

I am recommend him perform oral on Bernanke for exchange with paper money.

ZippyBananaPants's picture

Is it not enough that we all have already taken it in the ass?

MisterMousePotato's picture

I can tell you what the (maybe) unintended consequences of a one-year delay in Ovomitcare is, though:

The destruction wrought by this obamination will be postponed past the elections, which will benefit Democrats; and,

The Republicans will, as a quid pro quo, raise the debt ceiling (which IS the deal), which will benefit the Bad Guys. All of them.

Even when the GOP-e wins, they (we) lose.

Way to go!


SunRise's picture

For Honest Money - to the God of Labor, since honest money is simply stored labor

For Dishonest Money (Fiat) - Satan

Thought Processor's picture


Here's a question:


Does the United States Congress have the authority to STOP all FED operations?

My guess is no.

Anyone know the answer to that one?


Boris Alatovkrap's picture

Boris is think Congress is look sharp in expensive suit and make impressive speech from fine hard wood podium, but federal operation is control by executive branch.

... but what is Boris know?

Parrotile's picture

In view of the current "smoke & mirrors" mindset of the well-connected, that  "fine Hard Wood Podium" will probably be veneer on pine! "Worst case scenario" would be "printed paper coveing on MDF".

On the other hand, with the heaps of past evidence of the excesses and unjustified largesse common to our "Ruling Classes", an exceedingly fine hardwood (handcrafted from a single tree for grain fidelity) may well be the case; "Plenty for Us and Ours, not so much for the rest of you!"


Dr. No's picture

Of course they do.  Revoke the federal reserve act.


However, funding manned trip to Mars would pass easier.

Thought Processor's picture

Right.  But what is to stop the FED from simply detatching itself from the US Gov. altogether?

The BIS already controls most of the central banks around the world.   Everyone knows they want a one world currency that their banks can use (SDR's anyone.......?).

See link:  http://www.bis.org/cbanks.htm

The banks that own the BIS already have the assets to back a one world currency.  So they can at any moment detach from the US let it sink in it's own debt (which they helped provide), and create a one world currency system that is based soley on banking assets.  Money that will also be energy backed (oil, Nat Gas, whatever) and will be required in order to purchase such energy (but enforced by what military????).

The USD must fall as the world's reserve currency before they'll be able to do this.  Special Drawing Rights will then be used for people of the Elite to do their banking and such with SDR's, enabling them to then exchange to any currency as needed.   

As soon as the USD unhinges as the Petro/Energy-Dollar the US will be left hanging (as everyone knows).  

Suadi Arabia is the king pin in all of this.  If they do not maintain hold over the swing producing player in both Oil and Nat Gas then they lose their pricing power and all bets are off.   Hence the push to secure all other pivotal energy states in the Middle East.   They have no choice if they want to maintain control of any Petro/Energy currency and the current world economic system.

In the end, perhaps the FED is irrelevent.   Once the BIS switches to whatever the new world reserve currency is then the FED essentially loses all of it's power.

Maybe why they are loading their books with real assets now.  Will be much better than worthless USD currency soon.  At least they'll have something post USD collapse.

Then the US military members will be paid how?   In USD's?   Hmmmm.  What would happen to the US led world police enforcement system then?

Perhaps if congress did in fact revoke the FED's operations they would only speed the transition to a new one world currency.   


Food for thought perhaps.


Boris Alatovkrap's picture

Make money like "big guy" is require to be "big guy". Boris is recommend for reading pleasure, "The Prince" and "Art of War" by Niccolò Machiavelli.

bagehot99's picture

You can count on one hand the number of GOP leaders (lol, that's a funy word for mediocrities like Boehner), who have read The Prince, but perhaps a few have read Tzu's Art of War.

Sudden Debt's picture

you might!


EnslavethechildrenforBen's picture

They can all go work out in the fields like the rest of us.

Parrotile's picture

Cultural Revolution version 2??

Be very careful what you wish for - http://alphahistory.com/chineserevolution/historiography-of-the-cultural-revolution/ 40 Million deaths seems the consensus figure http://necrometrics.com/20c5m.htm#Mao 

slaughterer's picture

Turn off SNAPS and EBT, but do not stop QE and POMO.   Also, Fed can't taper without data, so taper delayed.  Throw in a little vol. for the shorts and Treasury bulls to get some relief.  Perfect.  1% needs gov. shut down.  

Tsar Pointless's picture

Precisely. I up-voted you.

The ironic thing is, a large portion of the 99%-ers will cheer said shut down, even though they rely upon government for their every need, whether or not they realize it.

Boris Alatovkrap's picture

Boris is not down-arrow fellow ZHer, but vehemently is disagree. Top 1% is rely on compliant dependent 99%. Honest to truth is AmerCan or Russian, or Syrian, or Kenyan, or Chinese or whatever of national origin, human being is capable and is yearn for self sufficiency, self dependence, self determination. Dependency is smoke on reflective surface and illusion is disperse quickly when re-introduce reality of human condition to dependent citizenry. Banker, Militarist, Corporatist, and particular statist is horrified by arousal of citizenry to self-cognitive state.

99% is fear of shut-down, but 1% is fear of 99% realize shut-down is not so to be scary.

Parrotile's picture

Wonder how many of those 99% have the resources to "survive" even a week without external services (power, water, food)??

At least 15% won't in the USA today. http://inplainsight.nbcnews.com/_news/2013/09/20/20457620-all-you-can-do-is-pray-what-poverty-in-america-really-looks-like?lite  

Boris Alatovkrap's picture

You are be nice to idiot, is not fault.

prains's picture

breast feeding to 17 years of age can have that effect

Boris Alatovkrap's picture

So sad Amerika boy is prematurely to be ween.

prains's picture

a warm bosom is hard to leave


the ones with an areolae moustache....not so much

EnslavethechildrenforBen's picture

What is that I see... is that cum on your lip?

smartstrike's picture

None of the programs that you mentioned are administered by US Gov.

prains's picture

The biggest unintended consequence will be that people realize the .gov is completely useless, things will run better without it, and want it to remain shut

kurzdump's picture

The most dangerous unintended consequence could be that people realize they are better off without it.

Tsar Pointless's picture

If you honestly, truly believe that, you are seriously delusional.

I'd personally love to see the government shut down for a few months, if only to prove wrong these "rugged individualist" types. You know - fat, white, obese men living in the suburbs/exurbs, who rely upon others every waking day of their lives.

I count on government for services that I cannot myself supply, and so does each and every other human on this planet.

If you hate government and want to see it eliminated, aren't you in turn and by definition an anarchist? How is that any better?

insanelysane's picture

Are you on fucking crack?  The Federal government provides 0 benefit to actual tax payers.  My local gov provides clean water, sanitation, schools, protection, etc but the Fed fucking government, nothing.

prains's picture

The ONLY thing the Federal nSSA provides with maximum efficiency is GUNS and butter to both sides of an unstable position. The guns for killin, the butter for reaming

EnslavethechildrenforBen's picture

The Government is good at counterfeiting paper money, which they can use to buy your daughter for the night.

At $100 a night, Ben and Barack can afford millions of young women every day.

Is one of them your daughter?.

Parrotile's picture

Without your Federal Government there are a LOT of "invisible services" that you'll not be needing then??

National Weather Service - and e.g. NASA who have a respponnsibility for maintaining the infrastructure that you rely on for accurate and timely severe weather warnings;

Maintenance / replacement / upgrading of the GPS satellite constellation: Federal Government not Private responsibility;

FDA - or are you happy to "hope" that the "profit-led" Pharmaceutical suppliers decide not to counterfeit / excessively cut their actives in dosage forms? (bear in mind that antibiotics are the World No 1 counterfeit / severely substandard class of drugs . . .);

CDC - to let you know in advance that "there's a microbiological problem out there" - without Government (and International, i.e. WHO) action SARS could, and most probably WOULD have been a Pandemic event.

Be careful what you wish for. Privatised services are not necessarily better that Publicly funded ones (as thouse of who had experience of British Rail, then the "better" more costly / fragmented / less safer "private" system learned too well . . .)

Mark Urbo's picture

The Federal Govt is useless - period.  Any Fed Govt job is a taxpayer burden - nothing more...

OwnSilverPlayMusic's picture

I think you got lost somewhere, you were looking for www.huffingtonpost.com

kurzdump's picture

I know that the world as we know it would end quite a few weeks after .GOV is closed. Chaos COULD spread. Nuclear plants COULD go bust. Warlords COULD arise - and fall. Skyscrappers COULD be empty, cities COULD turn into dangerous (almost empty) places. Lots of people COULD die.

However, I would give it a try ... and probably die. Maybe things would turn out MUCH better. Humanity cant go on the same way it did for the last few centuries forever. There will be a collapse. No one can avoit it. Not even unsophisticated people like you, Tsar.

insanelysane's picture

For shits and giggles just imagine if the fucks in DC announced at a press conference this afternoon that the income tax rates would be cut in half.  How would the markets react?  Shut the fucker down.

smartstrike's picture

LOL. You are going to pay more tax to pay for all the top 5% getting all the benefits and not paying any tax.

aerojet's picture

I think you misunderstand how our system is comprised--there isn't just one level of government.  State and local governments get a lot of federal handouts these days, but if the federal govt. imploded, the others could conceivably continue to operate.  The problem I see is that that government at all levels is running too damn hot, and *that's* the real risk here.  And it's the fault of the retirees and all the empty promises made to those retirees.  If we want to survive, we will stiff the retirees.  It's ugly, but there is no other way to resolve the dilemma.  Cut the benes and restore our system, or collapse the entire system. 

kurzdump's picture

Thanks for the clarification.

Parrotile's picture

If you are tentatively proposing "Death Panels", which you seem to be, will you be a willing volunteer?

Or, should people "work until they drop" - which also seems to be a popular idea on ZH. Popular, until YOU start getting older, and start getting less able through unavoidable "wear and tear".

The majority of the "Baby Boom" generation were saddled with compulsory retirement provision.They WILL be expecting their retirement to be at least as comfortable as that their parents are currently enjoying (the ones with the Big RVs plastered with "Spending our kids' inheritance" stickers).

The "Baby Boom" generation will also be THE biggest bloc voters - and we all know how amenable the Politicians of all stripes are to a spot of "voter pressure" . . .

So if you think they are "going to go quietly into the night" - think again, 'cause I can assure you that OUR BB Patients are VERY determined to excercise "Their Rights, Mate!" and get everything they are "entitled to" - and a good deal more. Where is the money coming from? "Not MY problem, Mate!"

X.inf.capt's picture

you do have a point...

at the V.A. hospital i see all kinds of vets griping about socialized medicine (obamacare), until i remind them that V.A. is the largest government run health care system IN THE WORLD! Pure socialized medicine. And if they dont like socialized medicine, then WHAT ARE YOU DOING HERE??? I see hear only pure hypocracy as answers....

LetThemEatRand's picture

Not to harp on soldiers many of whom are well meaning, but it is ironic how many career guys in the military are ardent anti-socialists.  They don't seem to notice who issues their paychecks and who pays for their cool military toys, bases, healthcare, education in many instances, etc.

X.inf.capt's picture

you are right...

the military gets EVERYTHING from the government....food, shelter, medicine, EVERYTHING! pure socialism...