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5 Ways a Government Shutdown Could Affect Your Money
By Adam Hardy MONEY RESEARCH COLLECTIVE
Furloughs, bare-bones customer service and more are looming if Congress doesn’t pass a spending bill ASAP.
It’s not deja vu. The U.S. is again barreling toward a self-imposed financial crisis as lawmakers scramble to cobble together a last-minute spending deal before Friday night.
Congress must act to avoid a government shutdown, with spending on track to lapse at 12:01 a.m. Saturday. A bipartisan spending package to fund the government until March was nearing completion until it was abruptly scrapped following disapproving comments from President-elect Donald Trump.
On Wednesday, Trump flexed his power before taking office by railing against the spending deal, threatening that any Republicans in the U.S. House of Representatives who “would be so stupid” as to support it would face a primary challenge when they come up for re-election.
Soon after, House Speaker Mike Johnson withdrew the package — which included billions in funding for health care policy, disaster relief and other unrelated government-funding measures — with no Plan B in place.
If Congress does not pass a full-fledged spending package (or at least another continuing resolution that extends the deadline), the government will shut down. A stopgap deadline extension deal appears off the table following Trump’s comments Wednesday. Trump said he wants a full deal without “Democrat giveaways” in place before he takes office Jan. 20.
Some of Trump’s allies in Congress took this as their cue to play hardball, some going as far as calling for a government shutdown until Trump takes office.
“The government can shut down all the way until Jan 20th as far as I’m concerned,” Rep. Marjorie Taylor Greene, R-Ga., posted on X. “I’m all in.”
However, experts warn the consequences of a government shutdown are wide reaching.
“Any shutdown is a bad shutdown,” Andrew Lautz, associate director of economic policy at the nonprofit Bipartisan Policy Center, tells Money. “Even if it’s a one-day shutdown.”
That’s because many government operations and agencies rely on discretionary appropriations, which is money that Congress must approve ahead of each fiscal year. About 30% of all government spending is authorized by this appropriations process, according to the center, including federal workers’ salaries, some benefits, certain lending programs and much more.
Without a deal, many government functions that are not “deemed essential to the protection of lives and property” could grind to a halt during a full shutdown, Lautz says.
Here are several ways a shutdown could affect your money.
1. Federal workers could be furloughed or paid late
Perhaps the most directly impacted group of people during a government shutdown are federal workers and contractors who have nothing to do with the political negotiations over spending. (Lawmakers still get paid during government shutdowns.)
“In the U.S., there are over 2 million federal employees,” Lautz says, plus “hundreds of thousands of federal contractors whose businesses in large part depend on the federal government.”
When the government shuts down, almost all of them are either furloughed — which means they are told to stay home without pay — or forced to work without pay because they are classified as “excepted” (read: essential) workers.
A 2019 law guarantees back pay for these workers when the shutdown ends, but they are forced to make do in the meantime with no clear timeline for their next payday.
“One missed paycheck can be a missed payment on your car, a missed payment on your mortgage.” Lautz says. “It can mean going into credit card debt.”
Given the size of the federal workforce, Lautz also notes that the missed paychecks could also have a ripple effect on the local economies with a high concentration of federal workers, given that they will likely have to curtail spending throughout the shutdown.
2. Travelers could see flight delays and closed attractions
For travelers, the good news is that air traffic control and airport security continue during a shutdown, so wide-scale cancellations and delays should largely be avoided.
“But that’s not to say there aren’t potential interruptions,” Lautz says.
According to the nonprofit Committee for a Responsible Federal Budget (CRFB), some TSA agents and air traffic controllers did not report to work unpaid — even though they were supposed to — during the last government shutdown in 2019. That did cause some air travel delays, the CRFB says.
Folks traveling during the peak holiday season and beyond should also note that there could be unstaffed or fully closed national parks during a shutdown. Museums, galleries and zoos run by the federal government, such as the Smithsonian, may also be closed. Lautz recommends calling to confirm in advance.
3. Government benefits might be disrupted (but not Social Security payments)
Many federal benefits programs could be affected during a government shutdown, but Lautz wants to make one thing clear: “Social Security benefits will continue to flow.”
However, the actual administration of the program, including customer service and verification of eligibility, could be halted. The Social Security Administration says it expects to keep most of its staff on the job during the potential shutdown but will likely still furlough about 8,100 workers.
Social Security benefits are one example of “mandatory” government spending, meaning the government is obligated to pay out these benefits even during a shutdown. Medicare and Medicaid benefits are also mandatory.
On the other hand, food benefits through SNAP, Section 8 housing assistance and veterans benefits may be cut off during a government shutdown. New loans and grants from the Small Business Administration, which help small businesses nationwide, would also freeze.
4. The release of economic data may be held up
Among the long list of agencies that are hobbled by a government shutdown are ones that monitor and report on the economy, namely the Department of Labor’s Bureau of Labor Statistics and the Bureau of Economic Analysis.
These agencies regularly release data related to the nation’s gross domestic product, unemployment rates, inflation and more. Economists, businesspeople and policymakers — especially the Federal Reserve — rely heavily on this data to make decisions.
When the data is released, the stock market reacts quickly, so investors also carefully monitor this information. Under a prolonged shutdown scenario, Lautz says the release of these crucial data could be delayed — making some investing decisions more difficult.
“I can’t predict how markets would respond to a government shutdown, but one thing I can say is that markets do not like uncertainty,” Lautz says. “A government shutdown and the delay of this economic data that markets depend on could add fuel to that uncertainty fire.”
5. It could lead to a debt default showdown
While the consequences of a government shutdown are not as severe as the national debt default — which the U.S. narrowly avoided last year — the current government funding debate is now getting wrapped up in negotiations around the debt ceiling.
The U.S. currently has over $36 trillion in debt and is expected to hit its limit at the start of 2025. With that deadline fast approaching, Trump called on lawmakers to fully negotiate both government spending and the debt ceiling before Inauguration Day.
“Anything else is a betrayal of our country,” Trump wrote on Truth Social.
Given current gridlock and past difficulty approving spending and debt deals separately, Trump’s call to negotiate them together is a tall order.
If the U.S. defaults on its debt, that means it does not have enough money on hand to pay its bills. The U.S. is largely believed to have never defaulted on its debt (though Reuters reports that it did technically default in 1979 due to check-processing glitches).
While unlikely, if a default were to occur, the adverse effects are difficult to overstate. Experts largely predict the U.S.’s credit rating would drop, gross domestic product would fall, stock prices would plummet, unemployment would increase, and federal government benefit payments would be delayed, including Social Security payments.
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Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 300 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on some of Money’s marquee rankings, including Best Places to Live, Best Places to Travel and Best Hospitals. He regularly contributes data reporting for Best Colleges, Best Banks and other lists as well. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors (IRE) at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in Saint Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.