Is it time to panic yet?

So, as analysts expected, government has shut down.  Here are some interesting points to note:

• Government shut downs are not that unusual.  While this is the first since the mid 1990s, between the 1970s and 1990s, there had been 17 government shut downs.  Here is a complete list.  

• Since 1980, there was only one shut down that lasted for more than a week - the 1995 shutdown engineered by Newt Gingrich, which lasted 21 days.  During the shut down, the public had largely blamed Clinton but afterwards, Clinton's popularity soared.

• During the last 21 day shut down, more than 7 million tourists were turned away from National Parks, museums and monuments, there was a massive pall in tourism related industries and significant adverse impact on small businesses. The 1996 shut down probably cost $2B according to some estimates, which is actually not all that much in the grand scheme of things.  

• An agency by agency breakdown of impact of the government shut down suggests that a lot of the departments being shut down won't have much impact if this lasts a week, however, as time goes by, the absence of the departments is going to have an increasingly significant impact.  This means that the cost is not linear.  A three month shutdown for instance, could have exponentially more impact than a three week one.

• The biggest issue is that there is another deadline looming - the debt ceiling.  The debt ceiling has to be raised before October 17.  The general assumption is that the fight will be over before then, but what if it is not?  The doomsday scenario is that the GOP ups the ante and adds the debt ceiling to the mix.

Short story here is that the costs are likely low and while an inconvenience and while a few billion dollars is nothing to scoff at, the long run impact will be minimal at best as long as its resolved in the next month or so.

The doomsday scenario is that the GOP adds the debt ceiling to the mix.  We are 17 days away from that. The two longest shutdowns since the 1970s were both longer than 17 days.  If the debt ceiling is added to the mix, then the impact could be devastating.