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The early days of the federal government shutdown won’t slow the American economy much. No workers are missing paychecks yet, and because it is a weekend, few businesses expect to feel the effects of lost customers or suppliers.

That could change, quickly, if the impasse drags out. The longer the government is shut down, the bigger the economic impact — and this time, the bigger the chances that the economy’s recent growth spurt could stall, at least temporarily.

Shutdowns bring the government to a partial stop, though so-called essential personnel keep working, and many services continue to be provided.

That partial stop costs the economy productive work time, historical evidence suggests, along with revenue that the federal government collects from daily fees at parks and museums. Private-sector companies that contract with the government have their work temporarily disrupted, and travel spending is reduced, affecting local economies.

When the government is late in paying contractors, it incurs additional interest costs. Delays in issuing federal checks, permits and licenses slow the rest of the economy’s workings, affecting export and import permits, mortgages and small-business loans. A government funding crisis also casts a pall on the economy, damaging consumer sentiment and business optimism.

The Longer It Lasts, the More a Shutdown Could Hurt the Economy

The early days of the federal government shutdown won’t slow the American economy much, but that could change if the impasse drags out.


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