The recent government shutdown inspired a lot of hyperventilating. While it ended quickly, the underlying political fight has not been resolved, so we could see another government closure soon.
But is this a threat to the economy? Hardly.
The US economy is huge. We currently produce about 19 trillion dollars of goods and services each year. What makes all that wealth generation even better is that we’re also well diversified across every sector and every kind of industry. That makes us resilient to trouble. Even with chaos in Washington, America’s economy marches on.
Day-to-day, the federal government doesn’t have much impact on the economy. For one thing, a shutdown isn’t really a shutdown. Vital federal functions (like defense) continue as usual. Police, fire response, trash collection, building permits, and many of the services on which we depend, are handled locally. The federal government does work to keep the whole system stable, but it would have to shut down for a long time to make much impact.
Meanwhile, despite the polarization and political turmoil we see on the news every day, the economy looks good. Unemployment is down, the stock market is up, and GDP growth is solid. This isn’t new — we can see steady positive trends since we started clawing back from the great recession in about 2010.
I won’t comment on the social and political conflicts that have riled up so many Americans. But as an investor, I feel good about where things are headed. The president is a real estate guy, and I remain confident that his administration will continue real-estate-investing-friendly policies. Tax cuts are good for corporate profits, and that is helping drive stock prices up. A weak dollar is making it cheaper for foreigners to buy American products and invest in the US, and creating even more upward pressure on asset prices. It’s a really good time to be investing in the US.
Whatever worries you have about potential economic risks, a US government shutdown should not be one of them. It’s more a media spectacle than a real danger. Our economy is strong and diverse, vital functions are protected, and local authorities can handle most of what we need from government. So don’t listen to doomsayers. The future still looks bright.