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Understanding the Effects of the Government Shutdown

On Behalf of Cullen Family Law Group | Oct 3, 2013 | Child Support |

For the first time since 1995-1996, the U.S. government has been shut down in a dispute over the federal budget. With the 2011 debt ceiling debate, then the 2012 fiscal cliff, and now this, it seems that governmental dysfunction has been normalized. Now that the shutdown has happened, we can start to assess the damage, as well as evaluate how the dispute is likely to play out.

Before we do, there are a couple of important things to keep in mind. First, we made it through the 1995-1996 shutdown, and we will make it through this one. Second, although there will be damage, it will be limited. Just as with the sequester spending cuts, the damage will be absorbed and the economy will return to growth. This too will pass.

What will it mean for the economy?

The immediate consequences are approximately 800,000 federal workers furloughed, suspension of “nonessential” federal services, and no pay for the remaining “essential” federal workers. “Essential” has some broad outlines, but military personnel, for example, may not get paid, and there is a great deal of uncertainty as to exactly what might happen. That uncertainty will be a key driver of the damage done to the economy.

The direct economic damage will take the form of reduced spending and reduced economic growth. Given the current federal budget, if the government were to shut down entirely, it would cost the economy about 0.5 percent of GDP per week. Much of the government will continue to function, however, so the damage won’t be that bad. A range of 0.2 percent to 0.3 percent of GDP per week of shutdown seems reasonable and is in line with other estimates of the damage: 0.9 percent of GDP for a three-week shutdown, per Goldman Sachs, and 0.2 percent of GDP per week according to IHS, an economics consultancy.

For comparison’s sake, the sequester spending cuts appear to have dampened economic growth by about 1.5 percent of GDP on an annual basis. A month long shutdown would get us into the same range of economic damage. Not good, certainly, but survivable. And if the shutdown were shorter than that, the damage to the economy as a whole would be proportionately less.

What should we expect going forward?

The more significant effects, and risks, of the shutdown will be indirect. The two biggest are the increase in uncertainty, which could reduce both consumer and business spending, and the impact on the debt ceiling negotiations. The debt ceiling negotiations will be considerably more important than the shutdown-and the fact is that the shutdown will make them more difficult.

Combined with the pending debt ceiling negotiations, the shutdown will make everyone more uncertain about the future. Uncertainty is bad for the stock market-the last time we got close to a debt ceiling showdown, the market took a serious hit-and for the economy. The last time we saw similar fiscal uncertainty was with the fiscal cliff at the end of last year, when economic growth came to a stop.

At this point, there’s no need to panic, as the damage is likely to be minimal and contained. As the standoff over government funding continues, however-and as we get closer to the much harsher spending cuts that will ensue if the debt ceiling negotiations fail-the stakes rise exponentially. We will be watching the situation carefully and provide further updates as warranted.

If you are paying or receiving support and the government shutdown has affected your average annual income by 10% or more, please contact one of our support attorneys so that we can review current and future support orders and protect your best interest in this difficult time.

Source: Ted Athans, Co-founder & Director of Financial Planning at Douglas and Athans, Wealth Management Group. Oct. 2, 2013

I’ve been served divorce papers that include false allegations: what do I do?

On Behalf of Cullen Family Law Group | Jun 6, 2025 | Domestic Violence

Receiving divorce papers is already overwhelming. When false allegations are part of the paperwork, the situation can feel even more difficult. It’s essential to stay calm and know how to address the issue. Here’s what to do if you receive divorce papers containing...

Do domestic partnerships affect divorce rights?

On Behalf of Cullen Family Law Group | Apr 14, 2025 | Divorce

Domestic partnerships offer many of the same rights and responsibilities as marriage, but they can complicate the divorce process. If you're ending a domestic partnership, your legal path may differ from that of a traditional divorce, especially in California....

Moore / Marsden calculations in California divorce

On Behalf of Cullen Family Law Group | Apr 10, 2025 | Divorce

In California, Moore/Marsden calculations determine how to divide property when one spouse’s separate property has contributed to the acquisition or improvement of community property. These calculations ensure a fair division of property in divorce cases, particularly...

How can you document SP for asset protection?

On Behalf of Cullen Family Law Group | Apr 3, 2025 | Family Law

When you're about to get married, it's important to think about how to protect your assets, including spousal support (SP) money. If you've received spousal support in the past or expect it during your marriage, you may worry about documenting its use—especially if...

What to expect during child support enforcement actions

On Behalf of Cullen Family Law Group | Mar 23, 2025 | Child Support

Child support represents the financial contributions a non-custodial parent makes towards their child's upbringing. It ensures a parent meets the child's basic needs, such as food, housing, and education. It also supports a child's wellbeing, especially when parents...

Can you reimburse expenses before child support orders take effect?

On Behalf of Cullen Family Law Group | Mar 17, 2025 | Child Support

After a separation, managing child-related expenses can become a challenging task, especially before any official child support orders take effect. Many parents wonder if they can reimburse child expenses during this interim period. Understanding your rights and...

Do mothers have more rights than fathers in custody cases?

On Behalf of Cullen Family Law Group | Mar 11, 2025 | Custody & Visitation

When it comes to custody cases, it is a common misconception that mothers have more rights than fathers. This often stems from historical trends and societal assumptions about parenting roles. Whether you are a mother concerned about maintaining your relationship with...

Why should you update your advanced directives during a divorce?

On Behalf of Cullen Family Law Group | Feb 28, 2025 | Divorce

Going through a divorce is challenging. One crucial aspect that often gets overlooked is updating your advanced directives. These legal documents play a vital role in ensuring others respect your wishes, even when you cannot speak for yourself. Protecting your...

Can you protect yourself and your children without a divorce?

On Behalf of Cullen Family Law Group | Feb 25, 2025 | Domestic Violence

Domestic violence creates a terrifying and dangerous situation. You may feel trapped, believing divorce is your only option for safety. The good news is that California law provides legal alternatives if your moral beliefs prevent you from getting a divorce. Let us...

What can California parents do if their child refuses to visit the other parent?

On Behalf of Cullen Family Law Group | Feb 14, 2025 | Child Custody

Dealing with a child who does not want to see their other parent can create stress for everyone involved. California courts expect parents to follow custody orders while being sensitive to their children's feelings. Parents can struggle to balance their legal...

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Recent Posts

  • I’ve been served divorce papers that include false allegations: what do I do?
  • Do domestic partnerships affect divorce rights?
  • Moore / Marsden calculations in California divorce
  • How can you document SP for asset protection?

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