We are now more than a month into the government shutdown with no end in sight. So far the government has remained closed for the entirety of the new year and many people are not hopeful that the two sides of our government can come to terms soon. This is the longest and one of the most expensive government shutdowns in American history. While the bureaucrats on Capitol Hill trade responsibility for the shutdown back and forth, Americans can take this time to reflect on several lessons we can learn from a government shutdown.
America Continues To Function, Even If Our Government Can’t
While there are many people that would have you believe that this extensive government shutdown is a sign that the sky is completely falling and we need our elected representatives more than ever, the American people seem to be numb to their alarmism.
Remember this: no matter which way you vote, all of our elected officials have failed real Americans with this shutdown. And while many politicians are quick to use struggling Americans as an example to justify their actions, there has been no concerted effort by any politician to increase the anemic savings rate for millions of Americans. There has also not been an official budget without a continuing resolution passed since 1998. Clearly, after 20 years, the government shutdown has become a tactic to hold the American people hostage and create urgency.
However, take notice of the goings-on around you. For the most part, people still rise in the morning and go to work, attend school, spend time with family and generally live their lives. Our government is much more reliant on us then we are on them in many ways. Don’t underestimate your own power in the face of this government shutdown.
Too Many Americans Are Living Without Savings
Right now millions of Americans are tightening their belts and many are wondering where they are going to get their families next meal. This government shutdown has been brutal on government employees living paycheck to paycheck and a gap of pay like this reinforces the absolute need for proper savings.
More than 32% of Americans are living without a penny in their savings account, while another 26% of Americans have less than $1000 dollars on hand. That’s more than half of the country that’s unprepared for this kind of emergency. No matter whether you’re a government employee or not, you need to have a proper savings plan.
Markets Are Especially Volatile In Long Shutdowns
Historically, government shutdowns spell trouble for the stock market and this shutdown is starting to set historical records, so investors are starting get freaked out. One of the main concerns about the shutdown is that it has deprived investors and economists of at least 10 key government data releases so far, making it difficult to estimate the impact this shutdown has had on the economy. Depending on the length of the government shutdown, investors could get seriously spooked, leading to sell offs that will only hasten a recession that’s looming closer and closer. Even the most optimistic economists who have denied the oncoming recession are beginning to change their minds.
The Economic Speed Bump
Although many people are indeed living their lives annoyed but unaffected by this extensive government shutdown, consumer confidence and luxury spending are beginning to suffer. People are starting to see the writing on the wall and the prospect of struggling in the face of another recession brought on by a global slowdown and triggered by this government shutdown isn’t inspiring people to keep the economic wheels turning. An extended government shutdown might not affect most American paychecks directly, but there is an effect on the psychology of the people when times are perceived as difficult. While it’s no surprise that federal employees would cut their household spending by 10% or more during a shutdown where they are not getting paid, it’s also possible that all Americans will start to close their fists on the money that they have and prepare for hard economic times. 70 percent of the economic activity is made up of consumer spending in this country and if people spend less, the short term effects of a scared populace could turn to long term effects.
In the long term, if this shutdown really does continue into the 3 or 4 month mark, there could be a devastating effect as even the most prepared Americans deplete their savings and hit their credit limits, leading to an even more distinct economic bump. The longer this stalemate continues, the more likely it is that this will be a difficult year for the American people.
Uncertainty During Tax Season
Perhaps one of the biggest concerns for most Americans is that this shutdown comes right as many people begin to think about their taxes. While more than 13 million Americans admit to filing tax extensions or waiting until the final day to file their taxes, many Americans choose to file as soon as possible, a prospect that looks dim because of this government shutdown. While the IRS has recalled 60% of its workforce to handle the tax refunds that must be paid out to Americans, it’s uncertain what kind of grid lock the American people are going to see as tax season ramps up. Consider the waves of “blue flue” as more and more TSA agents call in sick instead of being forced to work in a high stress situation for no pay.
All of this proves problematic for Americans that wait every tax season for their tax returns to make big purchases or plan their summer vacations. As with all of the other economic effects of the government shutdown, this may force many people to put their tax checks in the bank for another rainy day.
Preparing For Another Rainy Day
If there is one thing that this government shutdown underscores, it’s the need for a better personal financial system. Practitioners of the Infinite Banking System are not bothered financially by the political stalemate playing out in the nation’s capital. Infinite Banking gives people the financial freedom and breathing room that comes from a protected, truly-compounding savings vehicle with a built in cash value. If you are unfamiliar with IBC and you don’t want to feel the economic despair next time there is a shutdown, you need to call our team at Factum Financial. You can set yourself up for a future of economic prosperity when you meet with one of our wealth strategists for your free wealth strategy session. Contact our team today by calling 480-525-8180.
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