United States

Government shutdown starts at midnight


The United States is facing a government shutdown if agreement between the President and Congress (or rather Democrats and Republicans) can’t be reached by midnight tonight.

The idea of a shutdown is not new. Such a shutdown took place between 16th December 1995 and 6th January 1996. Around 800,000 government workers found themselves affected in what was a conflict between the then President Bill Clinton and the Republican controlled Congress over funding for Medicare, education, the environment and public health in the 1996 federal budget.

Any shutdown will not affect essential services such as the armed forces (although civilian staff might be affected), air traffic controllers and those involved in public safety. Federal courts are likely to continue working normally but the Inland Revenue Service (IRS) will largely close down as will the Securities and Exchange Commission, slowing down many financial transactions.

Defense contractors are likely to be able to manage for several weeks but if the shutdown goes on any longer then they could be affected by share falls and liquidity problems as could many small government contractors.

Around one million workers are expected to be affected from people who process forms and handle regulatory matters to workers at national parks and museums.

In 1996 a deal was eventually struck and although Clinton’s ratings plummeted during the crisis they rose soon after and he was re-elected in November 1996 with 49.2% of the vote. The Republicans lost eight seats in the House of Representatives but retained a 228 – 207 majority whilst they gained two seats in the Senate in the 1996 elections. It is far from unclear as to whether the American people will be so favourably disposed after this shutdown.

More detailed briefing on the politics and risk of doing business in this country is available to clients and subscribers. If you would like to know more then please contact enquiries@tradebridgeconsultants.com