A government shutdown will cost you

The new administration isn’t even officially in the White House, and we’re already watching a preview of Trump’s presidency season two.

This week, Elon Musk, who spent $277 million getting Trump elected and is now his close advisor, managed to tank a spending bill that would have kept the government open until March 14. How did he pull this off without any official legislative role? Through the power of posting, of course.

“‘Shutting down’ the government (which doesn’t actually shut down critical functions btw) is infinitely better than passing a horrible bill,” Musk posted on his platform X yesterday.

On the heels of Musk’s posts, Trump also voiced support for torpedoing the spending package that Republican House Speaker Mike Johnson negotiated. While House Republicans have reportedly come up with a compromise, if congressional Democrats or the Biden administration don’t agree to it, the government will shut down starting this Saturday.

It’s not quite that simple…

While Musk and his allies are champions of cutting government spending, the irony is that the last three federal shutdowns cost taxpayers a total of $4 billion combined.

The government has to reimburse thousands of furloughed federal workers whose paychecks stop when the government is closed. There’s also a whole host of revenue streams the government relies on, including entrance fees to national parks and even gift shop sales, that are cut off while the federal government is shuttered. For example, the National Park Service lost $7 million in revenue during 2014’s 16-day government shutdown.

The big picture: While the shutdown won’t affect your finances directly, these political shenanigans are an indicator of the infighting to come that could end up spooking investors. Along with the Federal Reserve’s hawkish cut yesterday, the shutdown is more evidence that the next four years might not be as relentlessly positive for the market as investors hoped after Trump’s re-election.

But analysts don’t seem too spooked yet: In a Wednesday note, analysts at Goldman Sachs noted that “a protracted shutdown looks unlikely in our view.—LB