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Understanding the Basics of the Government Shutdown

As you have no doubt heard, the United States government shut down at midnight (Eastern) October 1, 2013. There are many questions and concerns about this situation, but here are some basics.

What happened? In short, Congress did not pass any of their appropriations bills. These bills provide money to various to federal agencies.  Federal law requires agencies without these funding laws in place to close.

How long will this last? As with other shutdowns, this is largely up to the two major parties and their abilities to reach whatever deal is necessary to get the bills passed. If we look to history, the two most recent government shutdowns happened in the Clinton administration. One only lasted five days. The other lasted three weeks.

What’s closed, what’s opened? Not every public service is shut down entirely, as not every agency requires appropriations to function. Social Security and Medicare are not affected, active duty military continue to function, as does the Department of Defense, as do intelligence, law enforcement, and our embassies overseas. Some are only partially closed; U.S. Courts will be open for 10 days, for instance.

CNN has a frequently updated list of shutdowns at: http://www.cnn.com/interactive/2013/09/politics/government-shutdown-impact/index.html?iid=article_sidebar

How is this different from the debt crisis? They are different situations, but one can affect the other. The debt crisis relates to the separate matter of establishing how much money the U.S. Government can borrow in order to fund its various agencies and programs. However, Treasury Secretary Jack Lew says that the crunch is coming soon – no later than October 17.

With the shutdown a fluid situation, it’s difficult to say when this will be resolved. Whether you are a government employee or an ordinary citizen, it’s only natural to be concerned. It may be a good time to contact a financial professional and inquire if and how the shutdown may affect you.

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About the Independent Financial Advisor

Robert Pagliarini, PhD, CFP®, EA has helped clients across the United States manage, grow, and preserve their wealth for the past 25 years. His goal is to provide comprehensive financial, investment, and tax advice in a way that was honest and ethical. In addition, he is a CFP® Board Ambassador, one of only 50 in the country, and a real fiduciary. In his spare time, he writes personal finance books, finance articles for Forbes and develops email and video financial courses to help educate others. With decades of experience as a financial advisor, the media often calls on him for his expertise. Contact Robert today to learn more about his financial planning services.

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