'This Is Not Shutdown Lite': Impasse Could Last Months, Strategist Warns

Democrats, Bush said, "are standing firm on protecting the enhanced Affordable Care Act premium subsidies, presenting them as a critical safeguard for middle-class families. But shutdowns never last long due to policy fights. As the days drag on, the headlines inevitably shift toward real people and real impact — federal workers missing paychecks and communities losing access to essential services. Those voices become louder, more visible, and politically harder to ignore."

The U.S. military elite, according to Valliere, are "furious and demoralized, with mass resignations likely in the coming weeks. The most intriguing angle is the likelihood that the military will be used to curb domestic crime, not foreign adversaries. Troops soon many occupy several U.S. cities — Portland, Oregon may be next, and another dozen are on the target list."

The fiscal policy implications, meanwhile, "are huge," Valliere continued. "There’s no chance that defense spending will be reduced; another several billion will be spent on domestic programs, Ukraine and Gaza. The other fiscal bombshell will be the pullback by nervous consumers."

Bottom line: "We’re in uncharted waters," Valliere said. "Our late colleague Kevin McCreadie always preached that consumer conference was crucial for the overall economy — but a lack of confidence is imminent. Ordinarily, that would prompt rate cuts from the Federal Reserve, but these aren’t ordinary times."

History shows "that increasing costs and disruptions eventually cause even the strongest positions to bend," Bush added. "When that point is reached, Democrats will likely have no choice but to accept a clean extension, at least temporarily, to get the government running again. This doesn’t mean their fight for the ACA subsidies is over — far from it. The issue will reemerge, with some Republican support, once operations are back to normal, and the political momentum will favor restoring those subsidies ultimately. In short, while the length of the shutdown is uncertain, its course is predictable: defiance, disruption, compromise."

Shutdowns, by the Numbers

Since 1976, there have been 21 government shutdowns, with the most recent one occurring in late 2018 into early 2019, Jeff Buchbinder, chief equity strategist for LPL Financial, said Wednesday in a statement. "Historically, government shutdowns have lasted for a short amount of time."

On average, shutdowns have lasted eight days, with the longest spanning 34 days from Dec. 22, 2018, to Jan. 25, 2019, Buchbinder said. "The most recent shutdown was only a partial shutdown, as almost half of the 12 appropriations were previously enacted."

Historically, according to Buchbinder, "markets were not materially impacted by a shutdown."

In 2013, "the House and Senate were in a standoff over funding for the so-called Affordable Care Act and the government was shut down for 16 days during the first part of October," Buchbinder notes. "The S&P 500 had some down days, but overall, the equity market took all the political drama in stride with a 3.1% advance during those 16 days."

On average, Buchbinder added, "the S&P 500 has historically been about flat during shutdowns, with a slightly higher probability of gains vs. losses since 1976."

SEC Operations

Until further notice, the Securities and Exchange Commission will operate with "a very limited number of staff" due to the lapse in appropriations, the agency states in a notice on its website. The agency will pare down to 393 staff members.

The SEC is operating in accordance with the agency's plan for proceeding during a shutdown. "The SEC has staff available to respond to emergency situations with a focus on the market integrity and investor protection components of our mission. Our plan calls for the continuing operation of certain Commission systems, including EDGAR."

Social Security and Health Care

The shutdown does not affect the delivery of Social Security payments and Medicare benefits, noted Ramsey Alwin, president and CEO of the National Council on Aging, though "the government agencies that run these programs will face staff furloughs that will affect customer service and operations."

Programs funded by the Older Americans Act, "such as home-delivered and congregate meals, senior center programs, and family caregiver support, will be forced to cut back on services if the shutdown continues for a long period of time," Ramsey said in a statement.

“One aspect of health care that will be affected is telehealth services, which started being covered by insurance during the pandemic," Ramsey added. "These services are extremely important for older adults who live in rural areas or are homebound. They allow for crucial access to health services that are difficult to access otherwise by a vulnerable population."