Shutdown: Economy Slows while Uncertainty Grows

Traditionally money is not saved by a Government shutdown.  In fact, government shutdowns cost more money.  In the past, Furloughed government employees have been given back pay for the layoff period.  Now, the uncertainty is causing many consumers to forego vacations and other spending and focus on paying down consumer debt.  Not eating out, bypassing the replacement of the old computer, or phone or furniture and trying to cut spending at home, means the whole U.S. economy will experience a slowdown. 

Private firms have stepped up to help: Bon Jovi, Chef Jose Andres Rick Bayless, Stouffer foods were among those offering free meals to Government workers.  Some lending institutions, such as Wells Fargo, Bank of America, Citi and Chase have begun offering low or no interest financing to employees directly affected by the government shutdown.  Experts have different recommendations on how to get through the furlough:  Some institutions offer zero interest furlough loans or LOC (lines of credit), but the loan is usually limited to sixty days (60).  Another option, the HELOC (Home Equity Line of Credit) at today’s 5.64 percent interest rate may not be  attractive as the zero percent (0%) furlough loan, but the HELOC is not due in full in 60 days, so there is less uncertainty about whether you can repay it in time. 

No matter how you decide to resolve the shortage of funds, it will have to be repaid.  With that in mind, consumer spending, which had kept going in the early days of the shutdown has ground to a halt.  Consumers are being more cautious and looking at their own budgets and how to bring spending back in line, and that is now affecting the economy.