Understanding the Impact of the Federal Government Shutdowns
We barely avoided another federal government shutdown. But, this has become the new norm as Congress plays chess, checkers, or political chicken with other people’s money as the debt ceiling continues to rise. If you’re paying attention to the media or, worse, social media, like Elon Musk, it’s easy to push for a government shutdown when they can afford not to be paid for a few weeks or a month. Add the Trump tariffs into the mix, and you have to wonder and hope what’s next for the economy.
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Key Points:
- The federal government shutdowns continue to create chaos in Congress but also harm the economy.
- Those who support the government shutdowns do not have your best interests in mind.
- Raising the debt ceiling is necessary to avoid defaulting on loans, but like credit card debt, if the balance isn’t paid down, there are serious financial consequences.
- Did Congress forget what happened during the Great Depression and how the Work Progress Administration (WPA program) helped the country financially during those bleak financial times?
- Ignore the political rhetoric or social media trends from those that have their own agenda. Focus on your own financial future.
No One Wins with a Federal Government Shutdown
But that’s why I keep saying don’t listen to the noise. Use critical thinking and common sense. Don’t regurgitate what others say; I’m saying that for a specific reason. Recently, I saw a clip dating back to President Trump’s first term when there was a federal government shutdown. If you remember, the National Christmas tree was dark. It took volunteers and people with generators to get it lit up. Think about how sad that is for the country.
Of course, I see these talking heads say, “We survived the government shutdown.” Yes, we did. Do you know what else we have survived? Car accidents, wars, and a pandemic. Life, especially financially, shouldn’t be about survival but comfort. Of course, it means nothing to them since they’re not a government employee. But that’s why these government shutdowns are nothing more than BS.
Look at this from another perspective. Some government employees, such as law enforcement, still have to report to work during the shutdown. Do you think they’re working as hard? No, they’re not. I’ve been told that by my acquaintances. They sit in the office and pretend they’re busy since they aren’t getting paid.
The reality is that our motivating factor for work is money. You might like what you do, but wouldn’t do it for free. There’s a reason the saying is that people work just hard enough not to get fired, and employers pay just enough to make sure employees don’t quit.
But let’s go a step further. Government employees will get paid once the shutdown ends. So they receive their back pay. But look at the consequences. Yesterday, I received an email from my bank saying they would extend payments if I were a federal employee. How does this help you? Extending your mortgage another month or more isn’t beneficial in the long run. So, the government shutdown hits you where it hurts.
Suppose I am a government employee, and I’m not getting paid this month. I will start using credit cards to pay some bills, such as groceries. Will the government pay me back the interest I’ve accumulated on my credit card unnecessarily because of the shutdown? No, they’re not.
I also would have to cut back on miscellaneous expenses. I won’t be going to Starbucks or, worse, my local coffee shop. If the government shutdown lasts one month, how does that affect the coffee shop or other local businesses? Plain and simple, it’s a snowball effect.
So, for those who like to say the government shutdown doesn’t affect the government, that’s another lie. Not only are government employees affected, but so is the government.
If there are fewer employees or none, how is that efficient? The work still has to be done, and of course, now they fall behind. The fact is that everyone is affected. This is why I continue saying that no matter what you hear, stop, take a deep breath, and analyze the situation. Apply it to yourself. Remember, those supporting the government shutdown have an agenda that doesn’t include your finances. Now, let’s talk about the debt ceiling.
Raising the Debt Ceiling
President-Elect Trump has gone from raising the debt ceiling to now wanting to eliminate it altogether. The inconsistencies are his only consistency. But here’s the problem with the debt ceiling: it’s a catch-22.
We continue to get into more and more debt as a country. Compare it to your credit card. You need more available credit to continue to use your credit card and pay your bills. But what happens the more you use your credit card, since you still haven’t paid down the original balance? Your debt keeps accumulating, making it more difficult to pay off.
If Congress couldn’t agree to raise the debt ceiling with yet another 11th-hour agreement, then the United States couldn’t borrow more money to pay its bills. Ultimately, we default on our loans. What happens then? All hell breaks loose.
Compare it to what happens when you default on your credit card. All hell breaks loose. You are not creditworthy anymore, and if the United States isn’t creditworthy anymore because we defaulted on our loans, guess what? We’re in the same position.
So, who puts Congress in check if we have an unlimited debt ceiling? Remember, Congress controls the purse strings. The last thing we need as a country is for Congress to issue checks like maniacs. Like we have all heard before: spending like a drunken sailor on a weekend pass.
Raising the Debt Ceiling + the Trump Tariffs
However, increasing the debt ceiling is no different than increasing the balance on a credit card. It’s going to be a problem sooner or later. Of course, we still have the issue of the Trump tariffs, which will negatively affect the economy. Add up all these factors and explain how this will improve your financial situation. I’ll make it simple: it does not.
This is why I keep focusing on major purchases. Some are buying cars before President-Elect Trump takes office because they’re concerned about the tariffs. But if your expenses increase by 25% because of the Trump tariff, or approximately $4,000 more out of pocket a year, is now the time to buy a new car? That’s something you have to analyze on your own.
These decisions aren’t easy, but sit down, do the math, and maybe even speak to a financial advisor, accountant, or whoever to determine if this works for you.
Now, while we avoided the federal government shutdown, we still have the issue of increasing our nation’s debt. I don’t know how we will handle that, but we could go old school, like the WPA program, when we started building roads and bridges and created our country’s infrastructure.
Every year, Congress mentions this, but every year, they do nothing about it. But that was how we built our economy after the Great Depression. If you think about it, it is common sense; it’s not Elon Musk rocket science.
It reminds me of Henry Ford, whose employees fabricated cars and then provided them with loans to buy the cars, so in essence, he got paid twice. If we can fix our infrastructure, which everyone agrees needs to be fixed, then that creates jobs. Jobs generate revenue and income, which increases consumer spending. This, in turn, creates taxes or revenue for the federal government that can be used to pay down our National debt. But, and this is a big but, Congress has to be on the same page.
A bankruptcy lawyer can dream, can’t he?
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