Does government shutdown affect economy ?February 19, 2020
To lead and manage the nations or countries, most leaders in the world take into their account of the factor included the politic and economic factors. Both part must substance and stay firm and correlated each other, the leaders can not unbalance on both sides i.e. King, presidents, Prime Ministers or top nation leaders can not wait on one side or factor by forgot another. The nations can not survive if their leaders concentrate on the politic too much without focus on economy. If doing so, evenly, the government will confront with the shutdown the operation. Does the government shutdown affect economy? before we talk in detail about the impact of the government shutdown on economy, firstly, we should understand the meaning of the economy.
What is the economy ?
Economy is an area of the production, distribution and trade, as well as consumption of goods and services by different agents. Understood in its broadest sense, ‘The economy is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of resource, base on the WIKIPEDIA.
The economy was divided into two different categories such as Micro Economy and Macro Economy. The micro economy is the study or manage the household level such as individual or business entity, how do we improve the standard of living for the people? how do people or business entities make the decision on the allocation of their resources, price of goods and services, taxes, supply and demand of and take into account on the government regulation and legislation etc. We can say the micro economy try the find out the human decisions, allocation of resources, and choices.
Macro Economy is the study the behavior of the nations or countries and how the policies affect the economy in overall as well. Macro Economy analyses the industries and economy not for individuals o business entities. Marco Economy is study more detail on Gross Domestic Product (GDP) and how does it affect the economy by changing economic indicators such as unemployment, employment changes, labor wait growth rate, unemployment rate, retail sales national incomes, and prices.
When the government announce the shutdown, nonessential may no longer opening because the government lack of the fund to operate the system. Thus, it forces the government the close some functional offices until the budget or bill were approved by the congress for the upcoming fiscal year.
During the shutdown of the government, many federally run operation function were half and some office still run base on reserve cash, when this cash is running out, the these government offices are automatically close.
Why did the government shutdown ?
The government shutdown mostly happen in the United States of American (USA). For the United States the government mostly shutdown at the end of it fiscal year. The reason of shutdown because of the government fails the pass the funding programs of the fiscal budgets from the house or congresses or the president doesn’t sign the appropriate bill for operation or next fiscal year budget bills.
For example, The Federal Government partly shutdown its operation in the year of 1993, 2013, 2018,, and 2019.
Does government shutdown affect economy ?
Absolutely, When the government shutdown affect the growth. Due the people less spending especially workers and contractors because they don’t get paid from the government. Base on the theory when the household decrease their income make less payment and cause the demand decrease as well. And on the other hand, the government spending is the component of the gross domestic product with 38% of the GDP, base on data 2018, express that 38% of the government spend Vs GDP including
- Health Care – 23%
- Pension – 19%
- Education – 15%
- Defense – 12%
- Welfare – 6%
- Other – 25%
For example, At midnight on December 21, 2018,, the United States went into a government shutdown. to members of Congress and President Donald Trump were unable to agree on 2019 fiscal year funding, According the January 12th (Cambodia Time) article in Forbes. Many government employees and military members are still receiving their paychecks. However, the partial government shutdown is impacting an estimated 800,000 government employees, many of whom are required the report for duty even though they are not currently being paid. The shutdown also impacts hundreds of thousands of government contractors and their parent companies, neither of which are receiving compensation during the shutdown.
In this case, it also makes big impact the economy even thought the period of the shutdown in short term. In fact in the united states, 2019 is the longest government shutdown, 35 days, from December 21, 2018, the January 25, 2019. It reduced economic output by $11 billion: $3 billions in the fourth quarter of 2018, and $8 billions in the first quarter of 2019.
What should I do for more understanding about the topic?
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You also research among economy or finance website or new paper such as Bloomberg, CNBC, CNN, The Forbes, especially, the federal related official websites such as the federal reserve bank of America (The FED), U. S Department of The Treasury, and other official websites for getting more information on the shutdown of the government.