Could A Government Shutdown Trigger A Recession?

If politicians aren’t able to reach a deal, then the U.S. federal government could shut down on October 1. That might temporarily dent economic growth through reduced consumer confidence, as well as disrupting defense and healthcare spending.

However, historically government shutdowns have been brief, often lasting days, and most employees receive back pay. Hence, the disruption, though considerable, is insufficient to prompt a recession, if history is any guide. Also, the vast majority of government employees are employed by the state and local government, which are generally far less impacted by shutdowns at the federal level.