The federal government shutdown has officially arrived. Where the blame lands probably depends on each person’s politics and how they view their “opposing team.” Without getting into the causes and opinions about this 2025 federal government shutdown, Oggonomics wants to review eleven actual ramifications and use a historical blueprint to identify pitfalls and potential opportunities.
Before considering this list of ramifications and points, it is likely that if 11 individuals were tasked to analyze and predict the outcome this time around in 2025 that there might be 11 completely different views — and multiple predictions about how it ends.
And before taking any of these 11 points as gospel, please understand that the first day is a very fluid situation. Some threats may not be delivered. Some issues may not be as strong as had been telegraphed. And some issues may be worse than what had been telegraphed. And due to interpretations and human error or bias, some of these points may have already changed or may have been misinterpreted.
All caveats aside, AI was used to “fact check” most of these points and considerations. Let’s just say that the results were very mixed data and outcomes. It happens.
First and foremost for those with capital at risk, any serious stock market pullback has historically represented an incredible buying opportunity for long-term investors — and they have been tradable opportunities for short-term traders looking to scalp the market for short-term gains.
The second consideration is that federal government shutdowns are not new. It turns out that there have been over 20 such government shutdowns over the last fifty years. Generally speaking, government shutdowns have lasted just over a week — but the longest (at the end of 2018) lasted more than a month. Even then, the shutdown was partial rather than complete.
The third consideration is defining shutdowns. Historically, it has been 12 different appropriation bills that have to pass through individual sub-committees to cobble together the spending plans. If there is not a resolution, then non-essential spending at the federal level grinds to a halt. That’s a very short summary of the nitty gritty minutia. Again, how you define the process and end result may highly depend on your own political views and how you view your political opponents.
A fourth issue is which employees and agencies are affected, as well as which are not… It’s complicated! Support staff and contractors may be furloughed even if an agency remains in full operation. The DOJ, FBI, FAA, TSA, IRS, Medicare/Medicaid, federal courts and other critical agencies will keep running with most of their staff for normal operations as will normal military operations, even if support staff may be furloughed. A caveat is that many workers will be without pay until a resolution is reached. Also, many upcoming decisions may have to be delayed. Many more employees within the FCC, FTC, SEC, CFTC and other agencies that are deemed less critical to everyday life are likely to get some time off. Some of those positions may be permanently terminated by the Trump administration this time around. Government contractors and new contracts are generally put on hold, as are new hires. And the USPS, which still claims to be non-governmental, will still be delivering your mail.
Up next is the issues around “how and when” this all gets resolved. Continuing Resolutions have helped smooth the transition for when appropriation bills have not been passed, generally for a short period of time to allow appropriations to reach a resolution. Shutdowns have historically averaged a week or so.
The border operations will not be affected. Border security was deemed to be among the highest priorities of the Trump administration ahead of and after the election. Border patrol agents and ICE employees will not be taking a two-week hiatus to grill in the back yard and catch up what they missed on streaming over the last nine months.
A seventh issue is that a true default is not in the cards. Treasuries will still mature and new ones will be issued. The U.S. Treasury will still be fully staffed, at least by normal operational standards. And the Federal Reserve, which also claims to be private despite a “.gov” URL in its website, will continue in their efforts to promote price stability and full employment. If the U.S. were to enter into a true default, let’s just say that the ripples would be felt in most international markets as well. Fitch Ratings has issued a summary on the ratings as well:
The U.S. government shutdown does not have near-term implications for the ‘AA+’/Stable U.S. sovereign rating but highlights long-standing policymaking weaknesses and political brinkmanship around budgetary issues…
Fitch will continue to assess developments…
Despite increased uncertainty around U.S. policy and the possible erosion of institutional checks and balances, we expect the U.S. dollar’s predominant reserve currency status — a material sovereign rating strength — to continue for the foreseeable future.
Issue 8 to consider is that the stock market tries to look past shutdowns. While stocks were lower on October 1, the reality is that the S&P 500 was up over 13% YTD and was within 1% of the all-time high prior to this day. Investors have bought into sell-offs ahead of and into shutdowns. By the time the issues are resolved the markets may have already started trying to price in a resolution and return to normalcy.
Point 9… Mandatory spending will continue. This includes the prized trifecta of Social Security, Medicare, and Medicaid. These payments will still be made, but many services may be slower and some delays may be expected ahead if support staff and contractors were furloughed. Reaching support desks may be more challenging.
The tenth issue to consider is the ultimate financial savings, or lack thereof, from a shutdown. Most government shutdowns have not resulted in massive savings by the end because most federal workers are effectively guaranteed back pay even if they are not working. There can be an economic cost against GDP, but most federal employees (not contractors) get backpay. With furloughs and potential firings, this time could be different — but many people may need to see it to believe it in the coming days and weeks.
The eleventh issue is the final consideration because the shutdown wasn’t assured until the eleventh hour, and threats and promises often do not end up as harsh as they first seemed. Will furloughed workers be given permanent pink slips? Will employees who walked off the job be welcomed back into any other federal, state or local government role in the future? This all remains to be seen.
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There you have it. Again, eleven people being tasked to create a list of eleven implications might come up with many different points than were brought up here. Oggonomics is generally focused on investors and personal finance within broader economic issues. That also likely created a skew and perhaps even an admitted bias here despite some help using AI. And by the time this is read, some items may have already changed or may be in the process of changing.
Lastly, please do not forget nor ignore one of the key mantras from Oggonomics during this situation — If you are always bullish, you are foolish. If you are always bearish, you are broke!
