Report cites some financial effects of a government shutdown

By IVCPOST Staff Reporter

Sep 30, 2013 06:02 AM EDT

No activity was felt in the US Capitol just hours before a partial shutdown of the US government would most likely occur. The first shutdown since 1996, the possibility of a shutdown was brought about because of an impasse on the funding of the Affordable Care Act. Republicans had argued that the program, more commonly known as Obamacare, would cause insurance premiums to increase and would be detrimental to the economy.

A CNN Money report outlined the possible financial repercussions of a government shutdown. While workers of programs that are considered non-essential would be furloughed without pay, military personnel would continue to work. However, if the shutdown goes beyond October 7, they could experience a delay in their October 15 salaries. Federal housing loan applications and approvals would also be delayed. Courts would continue to dispense justice for about 10 days after a shutdown because it would still have funds from previous appropriations. Around October 15, however, the judiciary would have to reassess its funding capacity.

Another effect cited by The Washington Post was the possible rise in interest rates. The US Treasury was scheduled to ask for a USD 120 billion loan from investors on October 17. In the event of a shutdown, investors could get nervous about the government's ability to pay and spike interest rates.

Meanwhile, a report from the Wall Street Journal cited that the pace of economic growth would slow in case the government shutters. Morgan Stanley economists said it would slow by 0.15 percentage points per week if the shutdown occurs. However, this does not include the economic damage caused by a weakened consumer and business confidence.  

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