Federal Government Shutdown Consequences

Posted: 22nd December 2011 by ThrivingAdmistCollapse in Collapse, Depression, Economics
Photo: Creative Commons/Phil Roeder

Photo: Creative Commons/Phil Roeder

As the Federal Government threatens yet another shutdown this year, I can’t help but wish that the people in D.C would just bite the bullet and go through with it. ¬†I know that most people believe this to be more political theater for the masses as our ruling elite work out some deals in the backroom. ¬†But still, one has to think, what would exactly happen if the Federal Government simply stopped functioning? Would things go to the dogs? ¬†Or would life for the average american actually be better without a massive centralized bureaucracy?

Here are some possible effects of a complete federal government shutdown.

The Good

  • Lower Taxes

Without a functional centralized government, Federal Income taxes might not be garnished. ¬†The IRS is part of the federal government and if that entire body shuts down the IRS would not have the logistical capabilities to collect everyone’s pound of flesh. ¬†So if you still have a job, you just might get a significant boost on your paycheck(for a short while)!

  • Halt to most military adventures

All funding for the various wars and police actions we are currently fighting ultimately stems from Federal spending.  If the Feds freeze up then the entire military would run out of day-to-day funding in short order.  Think about it, we have military bases in 160 of the 200 or so countries on Earth.  All of these bases need money to keep running.  Cut off the spigot and they all would have to halt operations.  This might be a good thing for tax payers, though if prolonged, it might leave our troops stranded in foreign countries.  At home the only military force left to speak of would be the various state national guards.

  • Less regulations and cheaper prices

Without the tons of regulations and red tape that the Federal agencies are known for, you just might substantially lower the cost of doing business.  Imagine if the EPA suddenly shut down.  Environmental catastrophes aside, it would makes the cost of goods and services would drop sharply.


The Bad

  • Kiss National Highways good bye

The entire national highway system is federally funded.  Without that continuing stream of money, the roads connecting the 50 states together would quickly degrade.  A prolonged federal government shutdown might disrupt trade so much that the entire country fragments into several regional economic blocs.

  • No more homeland security or FEMA

Yep, both of these agencies are federally funded.  Without them, states would be hard pressed to sort themselves out in case of a natural disaster or terrorist attack.  Now if we consider that the military would be crippled by the same shutdown, the number of terrorist assaults on our shores would skyrocket!

  • No more Postal Service

Well to be fair, the USPS is almost bankrupt even with federal funding.  If the federal government shuts down, traditional mail delivery across the country might halt.

  • Schools and Universities would collapse around the country

Since so many schools and universities receive federal funding, a halt in the money flow would cause many schools to close.  The ones that survive would have to radically shave education programs without any economic value.


The Ugly

  • Domestic rioting and anarchy

Social Security, Unemployment Benefits, Medicare/Medicaid, Welfare, and Food Stamps would halt overnight if the federal government shuts down.  A huge percentage of  the American population would lack the basic means of survival.  This would obviously cause massive rioting, looting, and anarchy all over the country.

  • Massive Deflationary Depression

One of the key differences between Federal and State governments is the ability of the Feds to run the printing presses. ¬†Due to the collapsing middle class and general impoverishment of the people, the value of assets around the world has been tankiny. ¬†The government’s predictable response to this is to print trillions of dollars to just paper over the damage. ¬†This money printing has had the ironic effect of transforming a deflationary depression into an inflationary depression. ¬†If the Feds are gone from the picture, we might encounter massive deflationary pressures on the U.S dollar. ¬†Debts would never get paid and half the population might be unemployed.

  • World War III

I’m not the first to say this but if the American federal government crashes the entire world would crash. ¬†We are the only country that is effectively keeping the world in some state of order. ¬†If the military gets gutted and the global economy crashes, then the entire world would be filled with hungry people and desperate national leaders. ¬†So many countries have nukes nowadays and any little spark might set off a global conflagration.


It seems to me that despite all of it’s corruption and inherent idiocy, the federal government is still serving a somewhat useful purpose. ¬†Imho, even as Americans descends into ever deeper levels of poverty and desperation, the federal government(as dysfunctional as it is) is needed now more than ever. ¬†Despite doing nearly nothing to help average American families, the mere existence of this central Authority in the world preserves the status quo. ¬†It is this status quo which is preventing the entire world from collapsing into outright depression and war. ¬†And it is also the same status quo which is giving all of us extra time to prepare for the turbulent days ahead.

Have an opinion on this issue?  Please leave a comment!

  1. The government has shut down once before between 94-99 I don’t remember the exact year. It lasted over a month and Newt was Speaker of the House. The government kept functioning the entire time. It caused hardships for federal employees when the mortgage companies and other bill collectors were not understanding. When federal employees finally got paid it was in a lump sum check. A larger check has larger amount of taxes taken out of it. The ‘good’ listed never happened nor the ‘bad’ or ‘ugly’. Had the situation lasted for any longer length of time, things may have been different. Various states like California have also gone without budgets for short periods of times and survived. The only way your predictions would be valid is if the public lost faith that the government would eventually get a budget and working again. If Americans (and/or the rest of the world) ever reached the point of losing all faith in our government working, I fear it would be far worse than you think.

  2. ThrivingAdmistCollapse says:

    Thanks for the comment Katherin! I’m beginning to believe that the government will just keep printing $$$ until the whole thing blows up.

  3. Christopher Ellis says:

    wobble, wobble; but will it topple? be prepared to bite the bullet, there is no easy way out. Change comes in increments, or it comes in a rush.