“Give me liberty or give me death!”
– Patrick Henry
Shutdown Season
As the end of the month approaches, Congress faces the pressing challenge of preventing a partial government shutdown. Federal agencies and their employees are anxiously awaiting a last-minute deal to maintain funding.
Government shutdowns are not a new phenomenon in the United States; since 1976, there have been 20 such incidents, typically lasting a day or two. However, the most significant shutdown occurred during President Trump’s first term, lasting an unprecedented 35 days from December 22, 2018, to January 25, 2019.
These shutdowns can be remarkably disruptive, particularly in 2025, where a significant portion of the population relies on government support in various forms. The absence of federal dollars quickly impacts federal employees, contractors, businesses, and citizens dependent on government services.
At its core, a government shutdown signifies the failure to pass a budget. Congress, holding the power of the purse, is expected to pass appropriations bills to fund federal agencies and programs. If these bills remain unsigned by the end of the fiscal year on September 30th, federal funding ceases.
During a shutdown, non-essential activities at federal agencies come to a halt, shutting down services not critical for public safety or national security.
This situation is inherently political. The Republicans maintain a slight edge in the House of Representatives with a 219-212 majority, alongside a 53-47 advantage in the Senate. A 60-vote majority is needed for most legislation, meaning seven Democratic votes will be crucial for the passage of any funding bill.
By Golly
Members of Congress are actively engaged in political maneuvering, trying to craft narratives that will allow their party to assign blame during a potential shutdown.
This week, Senate Minority Leader Chuck Schumer highlighted a bipartisan approach in a letter to his colleagues, stating, “The only way to avoid a shutdown is to work in a bipartisan way, with a bill that can garner both Republican and Democratic votes in the Senate.”
Schumer’s intentions, however, may not be to avoid a shutdown at all, but rather to leverage the situation for political gain for the Democrats.
One pressing issue appears to be healthcare coverage. The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduced cuts to Medicaid and Medicare, necessary to finance President Trump’s tax cuts.
The Congressional Budget Office estimates these cuts could lead to millions losing health insurance coverage over the next decade. Democrats are determined to use the funding deadline to push their agenda. Senator Elizabeth Warren recently laid out the strategy:
“In September, the Republicans will need Democratic votes to pass a budget and keep the government operational. If you want my vote – and I hope to secure the votes of other Democrats – then, by golly, restore healthcare for 10 million Americans!”
This impending budget crisis is a high-stakes gamble, with many federal workers caught in the middle. Whether an employee remains on duty or is furloughed hinges on the essential nature of their role.
Ripple Effects
Essential employees, such as military personnel, federal law enforcement agents, and air traffic controllers, are deemed necessary to safeguard life and property. They often continue working without pay until a funding bill is enacted.
In contrast, non-essential employees face furloughs or enforced unpaid leave, typically affecting those in administrative roles within agencies like the Bureau of Land Management and the National Park Service. Federal contractors might also see their contracts suspended.
However, the consequences of a government shutdown extend well beyond political squabbles in Washington. They have real and significant implications for millions of Americans. When hundreds of thousands of federal employees cannot spend their salaries, local economies feel the impact.
Small businesses that rely on federal workers for consumer spending struggle to survive. Cafés located near federal offices suddenly find their clientele vanishing overnight. Furthermore, delays in processing federal development permits can hinder business growth and investments. Projects on federal land, which are essential for supporting the growth of artificial intelligence, may also face delays.
Moreover, the closure of non-essential services can disrupt a wide range of public programs. This may result in delays for Social Security benefits and veterans’ claims. National parks and museums may shut their doors, affecting tourism and local businesses.
A shutdown can also have political consequences; the party seen as responsible may face backlash during upcoming elections. Once a shutdown concludes, a transition period is necessary to return to normal operations.
How a Government Shutdown Can Restore American Independence
Additionally, government shutdowns can influence financial markets. Investors, traders, and analysts carefully monitor developments as political tensions rise in Washington.
Historically, stock market investors often consider a government shutdown to be a temporary disturbance. Unlike a debt-ceiling crisis, which threatens the government’s ability to meet its financial obligations, a shutdown does not impede the Treasury’s capacity to service its debt. For this reason, the stock market typically remains stable during such events.
The S&P 500 has been mostly unaffected during previous shutdowns, showing an average return of 0.04 percent. Remarkably, during the 35-day shutdown in 2018-2019, which saw around 800,000 federal workers either furloughed or working without pay, the S&P 500 actually rose by 10.3 percent.
Yet, the current market situation is precarious. Stocks today appear riskier than ever, more so than at the height of the dot-com bubble in March 2000. As a reminder, the following 30 months witnessed a staggering 78 percent crash in the NASDAQ and a nearly 50 percent loss in the S&P 500.
The stock market, as it stands, resembles a bubble in search of a pin. The prospect of a government shutdown could serve as the catalyst needed to release the mounting pressure built up over the last decade. A bear market seems overdue, and now might be the optimal moment to initiate that decline.
At Economic Prism, we believe that a government shutdown could be just what is needed for the wellbeing of all Americans. It’s essential to reflect on why such a vast segment of the economy became so reliant on government in the first place.
The reality is, the U.S. government is facing severe financial issues. Without resorting to money printing and inflation, it struggles to fulfill its commitments. A prolonged shutdown might be necessary to reduce government size and restore some independence to the American populace.
However, it’s important to remain realistic. Americans in 2025 seem to prioritize comfort and safety over liberty and independence.
In typical fashion, political leaders in Congress are expected to reach a last-minute compromise, ultimately establishing a continuing resolution to maintain government operations…
…and the country will continue on its troubling trajectory towards societal upheaval. We predict that the moment of crisis will unfold before the next presidential election.
[Editor’s note: Have you ever heard of Henry Ford’s envisioned southern city? Perhaps not. That’s why I recently published a crucial report titled, “Utility Payment Wealth – Profit from Henry Ford’s Dream City Business Model.” If you’re interested in how this lesser-known chapter of American history can lead to wealth, I encourage you to check it out. It will cost you less than a penny.]
Sincerely,
MN Gordon
for Economic Prism
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