So the Republican-led House and Democratic-led Senate failed to set a budget in time for the new fiscal year that began today. The government has gone into an official shutdown mode, which sounds like the end of the world. But it's not.
The U.S government has been furloughed before. Not just once or twice, but 18 times since 1976. There were eight shutdowns in the 1980s, none longer than three days. The last incident totaled 28 days over two segments in 1995 and 1996 after President Bill Clinton vetoed a budget passed by the two Republican houses of Congress.
Here's the good news: None of these shutdowns destroyed the American economy. The Dow Jones Industrial Average (^DJI 0.26%) has grown more than 16-fold since the first no-budget shutdown, and here's what happened during Clinton's battle with an entirely Republican Congress:
That's right: The market just chugged along without government support. The Dow closed 7% higher by the end of the 1995-1996 showdown, simply carrying out the momentum that was set by a 33% rise in 1995.
They say that it's different this time. The president is building his legacy on the Obamacare health care program, which tea party Republicans want to eliminate. That's the core of this gridlock and everything else is just noise. Neither side looks likely to fold entirely, and compromise has become a four-letter word. So I wouldn't be surprised to see this shutdown last as long as the Clinton impasse, which lingered amid temporary stopgaps until the final budget was signed in April 1996.
But, again, it's not the end of the world -- unless your government paycheck just got stuck in Washington gridlock. The rest of us -- and the stock market -- will do just fine until this storm passes.
