The economic impact of the Federal shutdown that began today all depends on how long it drags on and, in particular, whether the acrimonious stand-off in Congress spills over into the negotiations to raise the debt ceiling. The current shutdown over the failure to pass a continuing spending resolution is bad enough: 800,000 Federal employees will be put on unpaid leave and all "non-essential" services, including the publication of government economic data releases, will be suspended. A similar 21-day shutdown that began in late 1995 subtracted about 1% annualised from GDP growth. A failure to raise the debt ceiling by the end of this month would have a much more severe impact, however, with Social Security payments suspended and the risk that the Treasury will default on its debts.
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