But there are likely to be a wide range of indirect effects as well, because government operations provide the launching point for key activities driving economic growth, according to independent economists.
For example, the closure of national parks and museums may hurt hotels, restaurants and the people who work for them. The process of getting approval for a home loan could take much more time, slowing a housing recovery that is one of the few bright spots in the economy.
Headlines about dysfunction in Washington could also sow consumer and business fears even in parts of the economy not directly affected by a shutdown, leading individuals and businesses to cut back on spending and investment.
Economists estimate that the cumulative effect of a prolonged shutdown could trim economic growth in the final three months of the year by up to 1.4 percentage points. Under that scenario, the economy would hardly expand at all — at a time that is usually one of the most important economic periods of the year.
“That would mean a hit to employment and income as we approach the critical holiday season,” economist Diane Swonk of Mesirow Financial wrote in a recent analysis.
But for all the worry about a shutdown, economists are far more concerned about a potential default on the federal debt. The Treasury Department has warned that it will have only about $30 billion in cash on hand by the middle of next month, and estimates are that it will run out of money by the end of the month.
If it is low on cash, the government is likely to hold back on payments until enough money comes in by way of tax revenue, according to a Treasury Department inspector general’s report.
Social Security checks, veterans’ benefits and active-duty military pay could be delayed two weeks, according to estimates. Such delays would not only disrupt lives but also cause an economic contraction because that money often flows directly into the economy through grocery shopping, car sales and staple purchases.
Until recent weeks, many economists and investors have seen the prospect of a debt default as unthinkable because so many people around the world rely on the safety of U.S. Treasury bonds. But people close to the process now say it is all too possible.
“This Congress is dysfunctional, and I can no longer predict what it’s going to do,” said Rep. James P. Moran (D-Va.). “I can’t tell you for sure we’ll avoid a debt default. That’s mind-blowing.”
Steve Bell, a former senior Republican budget staffer and a top analyst with the Bipartisan Policy Center, said the issues surrounding the congressional battles this fall leave little room for error.
“What is different this time . . . is going to be the direct conflation of the debt ceiling and continuing resolution for appropriations,” he said. “That’s when the stakes are highest.”