Photo by Yasin Ozturk\/Anadolu via Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
A government shutdown looms<\/a> after midnight \u2014 and, depending on how long it lasts, could have far-reaching implications for household finances.<\/p>\n Those repercussions might include anything from delayed paychecks<\/a> and layoffs<\/a> for federal workers to broad effects for other Americans, including disrupted travel plans<\/a> and an inability to get a mortgage, economists said.<\/p>\n Enhanced subsidies for the Affordable Care Act \u2014 also known as Obamacare \u2014 that have made health plans less expensive<\/a> for millions of enrollees in recent years are also indirectly at stake.<\/p>\n Economists and market analysts are predicting<\/a> that Democrats and Republicans won\u2019t be able to reach an 11th-hour deal.<\/p>\n \u201cCongressional gridlock has struck again, leaving the government grinding toward a potential shutdown beginning October 1,\u201d Jennifer Timmerman, investment strategy analyst at the Wells Fargo Investment Institute, wrote in a note Monday.<\/p>\n<\/div>\n Every year, Congress must pass legislation to fund the federal government for the coming fiscal year. A shutdown occurs<\/a> if Congress can\u2019t wrap up the appropriations process on time.<\/p>\n Oct. 1 marks the start of the 2026 fiscal year.<\/p>\n During a shutdown, the government halts all unfunded \u201cnonessential\u201d functions, Timmerman wrote.<\/p>\n<\/div>\n By comparison, \u201cessential\u201d services related to public safety, such as air-traffic control or national security, will keep operating, she wrote.<\/p>\n Social Security checks and Medicare benefits \u2014 which are considered \u201cmandatory\u201d government spending \u2014 would continue flowing, Timmerman wrote.<\/p>\n The last shutdown happened during President Donald Trump\u2019s first term. It was also the nation\u2019s longest on record, starting in late December 2018 and running 35 days, Thomas Ryan, a North America economist at Capital Economics, wrote in a note Sept. 26.<\/p>\n<\/div>\n A shutdown that lasts for less than two weeks is unlikely to have a material or lasting impact on the U.S. economy or household finances \u2014 though the negative effects mount as the weeks pass, said Mark Zandi, chief economist at Moody\u2019s.<\/p>\n Most immediately, federal workers deemed to be nonessential would be furloughed, economists said.<\/p>\n They wouldn\u2019t be paid during a shutdown, though they\u2019d receive paychecks retroactively, Zandi said.<\/p>\n<\/div>\n Senate Minority Leader Chuck Schumer (D-NY) speaks during a press conference alongside House Minority Leader Hakeem Jeffries (D-NY), following a meeting between the Congressional Democratic leaders and President Trump and Congressional Republican leadership on funding the government, outside of the White House in Washington DC, United States on September 29, 2025. <\/p>\n Nathan Posner | Anadolu | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n Government contractors \u2014 from companies that provide cafeteria services, to those that provide strategic advice to the government \u2014 would start to feel the financial pain after about three to four weeks since they wouldn\u2019t be getting paid for services, Zandi said.<\/p>\n However, unlike federal employees, federal contractors have historically not received back pay, according<\/a> to the Committee for a Responsible Federal Budget.<\/p>\n This income loss could put financial stress on households \u2014 especially those in the D.C. area \u2014 that don\u2019t have stopgap financial resources to weather a missed paycheck, he said.<\/p>\n However, the pain shouldn\u2019t be too severe if the shutdown is short-lived, Zandi and other economists said.<\/p>\n \u201cThe direct costs of shutdowns are usually negligible, with most only lasting a few days,\u201d wrote Ryan of Capital Economics. Many shutdowns have largely played out over the weekend, blunting the impact, according<\/a> to the CRFB.<\/p>\n About 800,000 federal employees were either furloughed or worked without pay during the last shutdown, representing lost income of about $70 billion (or 0.3% of gross domestic product, in annualized terms), Ryan wrote.<\/p>\n<\/div>\n House Speaker Mike Johnson (R-LA) speaks next to U.S. Vice President JD Vance, Office of Management and Budget (OMB) Director Russell Vought and Senate Majority Leader John Thune (R-SD) on the day U.S. President Donald Trump meets with top congressional leaders from both parties, just ahead of a September 30 deadline to fund the government and avoid a shutdown, at the White House in Washington, D.C., U.S., Sept. 29, 2025. <\/p>\n Jonathan Ernst | Reuters<\/p>\n<\/div>\n<\/div>\n<\/div>\n That 2018-19 episode was only a partial government shutdown, since Congress had passed five out of 12 appropriations bills before the deadline, Timmerman wrote. The last full shutdown, like the one that looms, was in 2013 and lasted 16 days; about 850,000 workers were furloughed that year, according<\/a> to the CRFB.<\/p>\n The Congressional Budget Office estimates<\/a> about 750,000 federal workers could be furloughed each day of a government shutdown.<\/p>\n Here\u2019s a good rule of thumb: Every week of a government shutdown shaves about a tenth of a percentage point from annualized GDP for the quarter, on average, Zandi said.<\/p>\n \u201cEvery tenth matters, but it doesn\u2019t mean the world comes crashing down or that the economy will plummet into recession,\u201d Zandi said. \u201cThough the economy is quite vulnerable [right now]. It\u2019s struggling, especially with regard to jobs.\u201d<\/p>\n<\/div>\n If a shutdown occurs, the federal flood insurance program<\/a> would also immediately close to new policies until there\u2019s a spending deal, according to Jaret Seiberg, financial services policy analyst at TD Cowen.<\/p>\n \u201cThat means no mortgages which require federal flood insurance will be originated,\u201d Seiberg wrote in a Sept. 26 note.<\/p>\n Financial firms likely moved up mortgage closings ahead of the Sept. 30 deadline, softening the impact, though extended shutdowns \u201cwill block mortgages from being made,\u201d he wrote.<\/p>\n More from Personal Finance:<\/strong> Travelers could face disruptions, too.<\/p>\n Federal parks and monuments would close, for example, and staff deemed to be essential \u2014 like Transportation Security Administration officers and air traffic controllers \u2014 must work without pay, Ryan wrote.<\/p>\n Some TSA agents may choose not to show up for work, as happened during the last shutdown<\/a>, causing long lines at airports, delaying travel and disrupting tourism, Zandi said.<\/p>\n<\/div>\n The release of key economic reports would also likely be delayed, economists said.<\/p>\n For example, the Labor Department wouldn\u2019t issue its monthly jobs report<\/a> slated to be published on Friday. The bureau is also supposed to release its monthly consumer price index on Oct. 15.<\/p>\n The Federal Reserve, which is next convening Oct. 28-29, uses such data to guide its decisions on interest-rate policy.<\/p>\n The central bank would be \u201ckind of flying blind\u201d without such data at its fingertips, Zandi said. A shutdown of more than a month could lead to \u201csome serious errors,\u201d Zandi said, with implications for the job market and borrowing costs.<\/p>\n<\/div>\n For investors, the stock market has generally \u201cdemonstrated resiliency\u201d in past shutdowns as investors have looked past the political noise toward companies\u2019 long-term earnings prospects, wrote Timmerman of Wells Fargo.<\/p>\n In fact, any pullback would likely be short-lived and pose a good opportunity for investors to \u201cincrementally add exposure\u201d to certain sectors, she wrote.<\/p>\n The S&P 500 stock index has risen 4.4%, on average, during past shutdowns, which suggests other macroeconomic factors play a bigger role for investor outcomes, according to a Sept. 29 report by Monica Guerra, head of U.S. policy at Morgan Stanley Wealth Management.<\/p>\n However, a lengthy shutdown could pressure investor confidence in the nation\u2019s governance and add to existing jitters about the relative safe-haven status of the U.S. for investor assets, Zandi said.<\/p>\n<\/div>\n Federal student loan<\/a> bills will still be due during a government shutdown, said higher education expert Mark Kantrowitz.<\/p>\n The country\u2019s $1.6 trillion outstanding student debt portfolio is managed mostly by independent contractors, and these companies shouldn\u2019t be too disrupted if Congress is delayed in reaching a deal to continue government funding.<\/p>\n However, applications to the U.S. Department of Education for student loan forgiveness, which are already experiencing processing delays<\/a>, \u201cwill be further disrupted,\u201d Kantrowitz said.<\/p>\n Borrowers may also find it temporarily harder to enroll in one of the department\u2019s repayment plans or to reach someone at the agency for assistance with their loans.<\/p>\n<\/div>\n The US Capitol in Washington, DC, US, on Monday, Sept. 29, 2025. <\/p>\n Al Drago | Bloomberg | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n While shutdowns typically don\u2019t last long, this one may be drawn out due to political dynamics at play, analysts said.<\/p>\n \u201cA shutdown could go for a while,\u201d Chris Krueger, managing director at TD Cowen\u2019s Washington Research Group, wrote Sept. 29.<\/p>\n Republicans need 60 votes in the Senate to advance legislation that would fund the government, and need some Democratic votes to meet that threshold.<\/p>\n Congressional Democrats want Republicans to make concessions on health-care policy<\/a> as a condition of their support.<\/p>\n Specifically, Democrats want to extend enhanced subsidies for health insurance premiums for ACA enrollees, which are slated to expire at year\u2019s end absent congressional action. If they expire, that would raise premiums an estimated 75% next year<\/a>, on average, according to KFF, a nonpartisan health policy research group.<\/p>\n Roughly 22 million Americans receive those healthcare subsidies. They\u2019re estimated to cost about $30 billion per year to extend. Republicans say negotiations on continuing those credits should happen after the Senate approves a funding resolution.<\/p>\n Both sides seem dug in, experts said.<\/p>\n The only \u201caction-forcing catalyst\u201d to end a shutdown is the Nov. 1 open enrollment for ACA health plans, Krueger wrote.<\/p>\n<\/div>\n There\u2019s another reason this shutdown could play out differently than others in the past, experts said: President Donald Trump has threatened to fire<\/a> \u2014 not furlough \u2014 thousands of non-essential workers if Congress can\u2019t reach a deal. These would be permanent instead of temporary layoffs.<\/p>\n \u201cThat\u2019s the fodder for potential recession, in the current context\u201d of the U.S. labor market, Zandi said.<\/p>\n It would increase the unemployment rate by about a half percentage point if roughly 750,000 non-essential workers were laid off, he said.<\/p>\n \u201cI don\u2019t see that happening,\u201d Zandi said. \u201cBut if it does, it\u2019s a whole different ball game. The impacts would be very significant, very quick.\u201d<\/p>\nWhat is a government shutdown?<\/h2>\n
What\u2019s at stake during a government shutdown?<\/h2>\n
How does a shutdown affect consumers?<\/h2>\n
How workers can prepare financially for a government shutdown<\/a>
Ahead of EV tax credit deadline, IRS delays create \u2018anxiety\u2019 for car dealers<\/a>
Education Department opens FAFSA ahead of schedule<\/a><\/p>\nHow does a shutdown affect investors?<\/h2>\n
![\"Past](\"https:\/\/image.cnbcfm.com\/api\/v1\/image\/108205446-2ED3-MM-B-BLOCK-SHORT-092925.jpg?v=1759188164&w=750&h=422&vtcrop=y\")
How does a shutdown affect student loans?<\/h2>\n
How long might a shutdown last?<\/h2>\n
\u2018A whole different ball game\u2019<\/h2>\n