The first federal government shutdown in years began early Wednesday morning after lawmakers and President Trump stopped negotiations and spent the final hours before the stoppage largely focused on trying to set up the other side to take the political blame.
The victory of gridlock was sealed Tuesday evening when twin Senate votes failed to advance either a Republican bill (even as three members of the Democratic caucus crossed party lines to vote yes) or a Democratic plan. No compromise plan was offered, ensuring the funding lapse.
The shutdown — the first since a seven-week stoppage during Trump’s first term — began at 12:01 a.m. ET as the new fiscal year began. That last shutdown took place in 2018-19 and broke the record for the longest in American history.
Federal agencies will now implement their contingency plans and send hundreds of thousands of government workers home to wait out a stalemate.
Economic effects might be noticeable quickly as government spending largely ceases and economic data gets delayed, starting this Friday with what was scheduled to be a jobs report from the Bureau of Labor Statistics. These impacts could be mitigated if the stoppage ends promptly.
Trump on Tuesday also promised to heighten the potential effects of a shutdown — in part to pressure Democrats — saying “we can do things during the shutdown that are irreversible.”
He added later in the day “a lot of good can come down from shutdowns. We can get rid of a lot of things that we didn’t want.”
The shutdown is also not the only Washington policy focus for investors Wednesday. Markets will also be digesting new tariffs, as promised duties of 100% on a slice of pharmaceutical products and 25% duties on heavy-duty trucks are scheduled to go into effect.
This week also marked the last formal day on the job for government employees who accepted a Department of Government Efficiency program earlier this year called “fork in the road” that induced tens of thousands to leave government service.
Investors trying to make sense of these varied crosscurrents coming from Washington will likely be most attuned to how long this shutdown lasts and whether policymakers can find any off-ramps to end the gridlock.
As Veda Partners co-founder Henrietta Treyz noted Tuesday afternoon on Yahoo Finance Live, the duration of the shutdown has come increasingly into focus as “the question of the hour,” as another round of votes in the Senate were quickly scheduled for Wednesday.
Senate Majority Whip John Barrasso also told reporters Tuesday that votes could be scheduled throughout the weekend
Source: Yahoofinance.
