The shut-down of the US government is down to the fact that they can’t agree on the budget. This means that the government needs to pass a law regularly to fund the government. When this law isn’t passed in time it means that the government shuts down. The basic areas of the government continue to run, but the non-essential employees are sent home with no date to return to work and no pay.
What it affects
It affects places like museums and national parks, they are all shut and this will mean loss of revenue for the government. The last time that the government had a shut-down was in 1995 and this lasted for 21 days.
Why it happened
It has happened because the government can’t agree on a budget for the entire year, so they are passing these short term resolutions that last about six weeks for funding the government. This means that there is not a long period before the arguments start again.
Many of the arguments revolve around the debt ceiling, this is the total amount of money that the US borrows and this has a cap which it shouldn’t go over. This was first introduced in 1917 but since 1960 the celling has been increased 78 times, if an agreement for the raising of this celling isn’t reached before the 17th October then this is going to mean that the American government will be in default for the first time in history.
With the first shut down now in progress there has been an effect on the economy with the fall in the rate of the dollar on Tuesday. But this is not going to be the only fall that you will feel. The shut-down is going to have an impact on the real people. There will be people out of work and no money coming in until the government resumes. This is going to cost the tax payer money.
How much it will cost
The last time that the government induced a shut-down it cost $300 million per day, and that was 17 years ago. So the costs are going to be more this time.
So, if you take the amount of $300 million and divide this by the amount of people in the US, 313.9 million people (2012) it is going to cost the tax payer an extra $0.95 per day, just for having no government. It does not take into consideration the rise of inflation, this could put the amount per citizen to $1.42 with a cumulative rate of inflation at 49.1% over the 17 year period which the first figures are from.
But that is not all there is going to be an effect on the local economy where the employees would normally spend their money and this estimated at around $30 million a day. This means that the businesses across America are losing money at a rate of $0.09 per day per person.
So every American is going to be $1.51 per day worse off for every day that the government is in shut down, and this is without taking into consideration the fall in the value of the dollar
There will be the knock on effect from this that could put the prices up for good and services to regain some of the lost revenue. Again it will come out of the pockets of the citizens of America and not from the government.
Therefore, the shutting down of the government, is going to be affecting every person in America financially.