Shutdown only the opening act in budget negotiations

The economic impact of the Federal shutdown that began today all depends on how long it drags on and, in particular, whether the acrimonious stand-off in Congress spills over into the negotiations to raise the debt ceiling. The current shutdown over the failure to pass a continuing spending resolution is bad enough: 800,000 Federal employees will be put on unpaid leave and all "non-essential" services, including the publication of government economic data releases, will be suspended. A similar 21-day shutdown that began in late 1995 subtracted about 1% annualised from GDP growth. A failure to raise the debt ceiling by the end of this month would have a much more severe impact, however, with Social Security payments suspended and the risk that the Treasury will default on its debts.