smart spending

Who loses in a government shutdown?

Homebuyers and sellers. Those applying for loans from the Federal Housing Administration could face major delays in the processing of their loans in a shutdown, Parker says. Those delays would push back closings, hurting homebuyers and sellers. If the shutdown goes on long enough, it would "have a huge and devastating effect" on the credit system for homebuyers, Parker says.

Military veterans. If what happened in 1995 is any indication, applications for disability benefits and pensions could eventually be delayed or frozen entirely by a government shutdown.

Treasury buyers. Along with the coming fight over the federal debt ceiling, investors in federal debt may soon face some major disruptions. During the 1995 budget crisis, auctions of new Treasury issues were delayed, and the Treasury market overall was thrown into a state of turmoil as global investors worried about a U.S. government default on Treasury bonds.

While it's hard to know how the Treasury market will respond to a new crisis, Parker says there's likely to be volatility as global investors decide what to do.

Investors. Many of the federal reports investors devour, such as the Department of Commerce's data on gross domestic product and housing starts, and the Labor Department's monthly report on the job market, are being delayed by a lengthy government shutdown. But more fundamental worries about political gridlock in the U.S. could spook global investors, says Goldwein.

"I don't think there's a huge direct cost of the shutdown to the economy. I don't think we're going to see GDP numbers fall or stock markets sink or anything like that," he says. "What I do think is likely is the government shutdown will call into question whether politicians can raise the debt ceiling, and more fundamentally, whether they can deal with our long-term fiscal issues."

Bankruptcy filers. Those filing for bankruptcy may eventually face delays until a new budget is adopted. During the 1995 shutdown, bankruptcy courts temporarily closed their doors, and the same could happen this time.

Applicants for federal food stamps. If this year is anything like 1995, new applications for food stamps could be delayed by the shutdown, as workers in the U.S. Food and Nutrition Service are furloughed. That could lead to significant hardship for families in need of food assistance, Parker says.

Vacationers. National parks and museums all over the U.S. will likely be closed in a government shutdown, says Goldwein, throwing a monkey wrench in many Americans' vacation plans.

Likely to be unaffected

Current Social Security beneficiaries. It's likely the federal government will act to make sure Social Security checks continue to flow to beneficiaries.

"There's a little bit of ambiguity in this area, but during the last shutdown, Social Security checks did continue to go out," Goldwein says.

Current Medicare and Medicaid beneficiaries. The government will likely continue making payments to providers for medical services through Medicare and Medicaid.

Even if it doesn't, it's possible Medicare providers will continue to offer services with the expectations they'll be paid once the crisis passes, Goldwein says.

Employees and customers of government entities not directly funded by the budget. If you're closing on a non-FHA mortgage, which would likely flow through Fannie Mae or Freddie Mac, or you just need to send a letter through the post office, don't worry. These government entities won't be affected by the shutdown. They'll continue to operate as normal.

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