Government Shutdown 2025 — What It Means for Your Money

What Happens During a Government Shutdown [0:25]

• Essential services, including Social Security, Medicare, Medicaid, and VA benefits, remain funded.
• TSA operations and federal courts continue to function.
• Services that will be closed include certain national parks, the SBA, and economic data collection and reporting.

This section clarifies which government functions continue and which cease during a shutdown, emphasizing the impact on public access and economic information.

"What gets shut down in a federal government shutdown? Essential services will continue."

Impact on Economic Data and Federal Reserve Decisions [0:52]

• The jobs report, typically released on the first Friday of each month, will be delayed due to the shutdown.
• The Bureau of Labor Statistics (BLS) will suspend all operations, halting data collection and release of scheduled reports.
• The CPI inflation report, scheduled for October 15th, is also in jeopardy of being delayed.
• These delays are significant because the Federal Reserve relies on this data for its interest rate decisions.
• The next Federal Reserve meeting is scheduled for October 29th, and a prolonged shutdown could force the Fed to make decisions without crucial economic indicators.

The suspension of key economic data collection and reporting has direct implications for the Federal Reserve's ability to make informed interest rate decisions, potentially leading to actions made in the absence of vital information.

"So, you know, with that in mind, I just want to say that the next Federal Reserve meeting is going to take place on October 29th. So, there's still time, you know, there's still going to be time for these reports to be generated for them to review and make their decisions. But of course, that's under the assumption that the politicians are going to come to an agreement. They're going to settle this and reopen the governments relatively quickly. Otherwise, I mean, if this thing drags out, then they're not going to produce the reports and the Federal Reserve is going to have to make their decisions just in the dark."

Social Security Cost of Living Adjustment Delay [2:34]

• The announcement of the Social Security cost of living adjustment (COLA), scheduled for October 15th, may be delayed.
• This delay is contingent on the inflation report also being delayed.
• Beneficiaries will still receive their COLA on time for 2026, but the official announcement of the amounts will be postponed.

The delay in the inflation report could push back the official announcement of the Social Security cost of living adjustment, causing frustration for those awaiting the exact figures.

"However, I just want to be crystal clear about this. Beneficiaries are still going to get their cost of living adjustments on time for 2026. However, I'm just pointing out that it's going to be frustrating that people are going to have to wait longer to get the official amounts to get the official announcements."

Impact on Stock Markets During Shutdowns [3:07]

• Historical data suggests that government shutdowns do not have a significant negative impact on stock markets.
• During past shutdowns, the average stock market performance was up 0.3%, and the median performance was up 0.1%.
• This indicates that shutdowns have a minimal effect, contrary to hopes that they might cause a market crash.

The historical performance of the stock market during government shutdowns suggests a surprising resilience, with fractional gains rather than losses.

"The stats show that a government shutdown does not have a big impact on the stock markets."

Effect on Precious Metals and the U.S. Dollar [4:00]

• Government shutdowns can signal political instability, which tends to weaken a country's currency.
• A U.S. government shutdown typically weakens the U.S. dollar.
• A weaker dollar can be beneficial for commodities, including gold and silver.
• The speaker's opinion is that cash is losing value ("cash is trash") and shutdowns exacerbate this trend for the U.S. dollar.

The political instability signaled by a government shutdown can lead to a weakening U.S. dollar, creating a favorable environment for investments in commodities like gold and silver.

"It's common that a US government shutdown weakens the US dollar, which I mean already it's having a terrible year. But if the dollar weakens even further because of this, that's going to be good for commodities, that's going to be good for gold and also for silver."

Federal Employees and Back Pay [4:42]

• Approximately 750,000 federal employees are expected to be furloughed without pay during the shutdown.
• These employees are entitled to retroactive pay, or back pay, once the government reopens, as per the government employee fair treatment act.
• Essential federal employees will work without pay during the shutdown but will receive compensation later.
• The law mandates that employees be compensated as soon as possible after the government reopens, regardless of regular payroll schedules.

Federal employees affected by furloughs will eventually receive their pay, but the immediate consequence is working without immediate compensation, with the assurance of back pay upon the government's reopening.

"Workers are going to be placed on leave without pay. However, you know, these federal employees, they're still going to be paid retroactively. It's basically back pay once the shutdown is over because of the government employee fair treatment act."

Congressional Pay During Shutdowns [5:30]

• Members of Congress, including senators and representatives, will continue to collect their paychecks during the shutdown.
• This is mandated by Article 1, Section Six of the Constitution.
• This situation is presented as unfair to the millions of federal employees who will be waiting for their pay.

While federal employees face delayed paychecks, members of Congress are constitutionally guaranteed to continue receiving their salaries during a government shutdown.

"There's going to be exceptions. Members of Congress, so our senators, our politicians in the House of Representatives, they're still going to collect their paychecks during the shutdown, which is mandated under Article 1, Section Six of the Constitution. Yeah. I mean, I just want to say this seems unfair to the millions of federal employees that are going to be waiting for their paycheck, but I guess that's just my opinion."

USPS Operations During Shutdowns [5:54]

• U.S. Postal Service employees will continue to receive their paychecks during a government shutdown.
• This is because the USPS is a self-funded independent agency.

The U.S. Postal Service operates independently and is self-funded, ensuring its employees continue to receive their regular pay even during a federal government shutdown.

Economic Impact of a Shutdown [6:03]

• A government shutdown is expected to have a minimal impact on the U.S. economy as a whole.
• This minimal impact is attributed to employees receiving back pay and the government continuing to spend what it would have spent regardless.

The overall economic effect of a government shutdown is anticipated to be slight, largely because the financial impact is offset by retroactive pay for employees and sustained government expenditure.

"It's going to be similar to its effect on the stock market. A shutdown's going to have minimal impact on the US economy. Employee, just think about it, because employees are going to get back paid. The government's going to spend what they would have spent. So again, minimal impact."

Duration of Government Shutdowns [6:23]

• In the past 50 years, the average government shutdown has lasted approximately eight days.
• However, the duration can vary significantly, potentially lasting a few days or extending for a considerable period.
• The speaker does not have a strong opinion on how long the current shutdown will last.

While historical averages suggest shutdowns are relatively short, their actual duration can be unpredictable, with the current situation's length remaining uncertain.

"In the past 50 years, the average shutdown lasts about eight days. However, as you can see, it can vary greatly. Maybe it'll last a few days and maybe it's going to get resolved next week or maybe it's going to drag out for quite some time. But I'll tell you, for certain topics or for certain questions, I have a strong opinion and I share them with you. But for this one, like I honestly don't have a strong opinion."

Political Standoff in the Senate [7:00]

• The Republicans hold a majority in the House of Representatives and the Senate.
• Passing a bill in the House requires a simple majority, posing no major hurdle.
• In the Senate, however, 60 votes are needed to pass a bill, not just a simple majority.
• This means Republicans need to secure votes from Democrats to pass a funding bill.
• A recent vote on a funding bill (CR) failed to reach the 60-vote threshold, resulting in a 55-45 outcome.

The legislative process in the Senate, requiring a supermajority for funding bills, creates a critical point of contention, necessitating bipartisan agreement that has currently resulted in a legislative impasse.

"But in the Senate, this is where the problem is because there are 100 seats in the Senate and the Republicans have 53 of them. But in the Senate, it's not a simple majority. They need 60 votes to pass it. So in the Senate, the Republicans need to get some Democrats on board."

Core Issues and the Temporary Nature of Funding [7:45]

• The parties are at a stalemate, primarily over healthcare subsidies.
• The current government funding bill is a temporary seven-week extension.
• If an agreement is reached and the government reopens, the same disputes over funding are likely to recur in seven weeks.

The current funding agreement is a short-term solution, indicating that the underlying political disagreements, particularly concerning healthcare subsidies, will likely resurface, prolonging the cycle of potential shutdowns.

"So the parties are at a stalemates over, you know, various things, but it's mainly over healthc care subsidies. But I'll tell you this, the really sad part is that this government funding bill is just a temporary extension for 7 weeks of funding. So if they actually come to an agreement and reopen the government, the politicians, they're probably going to have the same this same exact battle in seven weeks. Like how sad is that?"

Public Blame for the Shutdown [8:13]

• A poll indicates that 38% of people blame Republicans for the shutdown.
• 27% of people blame the Democrats.
• 31% blame both parties.
• 4% do not blame either party.
• This poll is presented in the context of Republicans controlling both the House and the Senate, while Democrats are seeking to repeal certain healthcare cuts.

Public opinion on who is responsible for the government shutdown is divided, with a plurality placing blame on Republicans, while significant portions also fault Democrats or both parties.

"So, the first thing is that the Republicans control the House and the Senates, right? So, they're the ones in charge. However, the Republicans want a temporary extension of the funding with no changes. So, it's the Democrats are the ones that want to repeal certain health care cuts. You know, their arguments is that they're fighting for the people. They want to lower health care costs. However, they're the ones that are asking for changes."