How Would a Government Shutdown Impact the Economy?

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Sept. 23 (Bloomberg) -- On today's "The Real Deal," Michael McKee examines the impact of a government shutdown on the U.S. Economy. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Years since the government actually shut down, that was during the clinton presidency.

Economics editor mike mckee has a real be a how the shutdown could affect the economy.

Let's take a step back and talk about what it is.

There are two issues.

One is the government shutdown and the other is the debt ceiling debate.

Under a government shutdown scenario, the congress fails to appropriate money so government offices cannot spend any.

Whereas under a debt ceiling, they don't have the money to pay their bills.

The question first on the table is the government shutdown.

What happens then is that you lose federal employees, but you don't lose a lot of economic activity.

There will be some very visible signs because they shut down things like national parks and your passports don't get process.

But the actual economic impact is very small.

You go down to the shutdown -- there were 2 -- actor back in 1995 and 1996. very few government employees actually affected because there are a lot of people who are paid under mandatory federal programs , entitlement programs, they stay on the job.

Social security checks will go out.

Civilian employees at the department of defense, generally considered essential, they will stay on the job, the postal service.

The second government shutdown in 1996, only nine percent of employees were off projected total cost, about $1.5 billion, maybe one millionth of gdp.

The other point that buckeyes keep getting paid so they don't have -- and if the d tea party wants toefund obamacare, congressional research service say it will probably fall under the mandated portions of the governments of they probably will keep going.

So why is this a big deal?

It is really a confidence lesson.

It did hit cons -- confidence when the republicans took over congress and they faced off with president lyndon we saw gdp all until a budget deal was reached.

It was built positive.

It could have an effect.

But it is a problem.

Much worse is the debt ceiling, that should hit in mid october probably.

And we are very close to that level right now.

Mike, thank you so much great economics editor mike mckee.

We will keep the budget in focus.

Democrat congress meant jim hines of connecticut who sits on the house committee on financial services will weigh in in just a few minutes.

Let's move over seed because victorious and last night's german elections, angela merkel just told supporters as she is already in talks with the social democratic artie about forming a government.

Hans nichols joins us from berlin with the latest.

Is she going to form a grand coalition?

That looks like the most

This text has been automatically generated. It may not be 100% accurate.

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