What it means for your money

The federal government shut down on Oct. 1. Depending on how long a shutdown lasts, it could have far-reaching implications for household finances.

Those repercussions might include anything from delayed paychecks and layoffs for federal workers to broad effects for other Americans, including disrupted travel plans and an inability to get a mortgage, economists said.

Enhanced subsidies for the Affordable Care Act — also known as Obamacare — that have made health plans less expensive for millions of enrollees in recent years are also indirectly at stake.

Every year, Congress must pass legislation to fund the federal government for the coming fiscal year. A shutdown occurs if Congress can’t wrap up the appropriations process on time.

Oct. 1 marks the start of the 2026 fiscal year.

During a shutdown, the government halts all unfunded “nonessential” functions, Jennifer Timmerman, investment strategy analyst at the Wells Fargo Investment Institute, wrote in a note Monday.

By comparison, “essential” services related to public safety, such as air-traffic control or national security, will keep operating, she wrote.

Social Security checks and Medicare benefits — which are considered “mandatory” government spending — would continue flowing, Timmerman wrote.

The last shutdown happened during President Donald Trump’s first term. It was also the nation’s 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.

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 — though the negative effects mount as the weeks pass, said Mark Zandi, chief economist at Moody’s.

Most immediately, federal workers deemed to be nonessential are furloughed, economists said.

They won’t be paid during a shutdown, though they’d receive paychecks retroactively, Zandi said.

Government contractors — from companies that provide cafeteria services, to those that provide strategic advice to the government — would start to feel the financial pain after about three to four weeks, since they won’t be paid for services, Zandi said.

However, unlike federal employees, federal contractors have historically not received back pay, according to the Committee for a Responsible Federal Budget.

This income loss could put financial stress on households — especially those in the D.C. area — that don’t have stopgap financial resources to weather a missed paycheck, he said.

However, the pain shouldn’t be too severe if the shutdown is short-lived, Zandi and other economists said.

“The direct costs of shutdowns are usually negligible, with most only lasting a few days,” wrote Ryan of Capital Economics. Many shutdowns have largely played out over the weekend, blunting the impact, according to the CRFB.

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.

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 to the CRFB.

The Congressional Budget Office estimates about 750,000 federal workers could be furloughed each day of the current government shutdown.

Here’s 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.

“Every tenth matters, but it doesn’t mean the world…