For now, the government shutdown has an eerily mundane feeling to it (assuming you’re not working for Uncle Sam). Unless you’re traveling extensively or have significant business exposure to impacted institutions, it’s easy to ignore this contentious issue. But if Washington can’t find a solution, the ticking economic timebomb will inevitably explode.
As I’ve mentioned in prior articles for Crush The Street, the shutdown negatively affects people across all income levels. However, those who have only modest means – such as “ground level” TSA workers – present the greatest risk. Without adequate savings, a prolonged shutdown will force them to seek alternative employment, leaving gaps in federal services and functions.
But the narrative that society faces an imminent threat has a vulnerability: when we go outside and go about our daily lives, everything appears normal. If an economic timebomb threatens our national stability, it’s doing a poor job demonstrating it.
However, this lull is extremely deceptive. That’s because the economic timebomb will manifest according to an exponential curve. Similar to compounding interest, the amount of money saved during the initial years doesn’t appear like much. But after several years, the curve explodes upward. During the “meaty” portion of this trajectory, every amount reinvested yields an exponentially greater reward.
But again, you don’t experience this benefit until the latter portion of the exponential curve. In other words, you must lay the groundwork early before seeing the results of compounding interest.
The Economic Timebomb Can Hit Us Without Warning
What we have with the government shutdown is another exercise of compounding interest. However, in this case, we should call it compounding pain.
At first, we don’t see any reasons to worry about an economic timebomb. In order to keep the pretense of orderliness, the federal government has coerced its affected employees to work without pay. Therefore, we wait at airport lines without any sense of trepidation. That we’re enjoying services “for free” is something we seldom ponder.
Perhaps we can go another month without opening the government, and everything will more or less look the same. Unfortunately at this point, the tires have been pushed beyond their breaking point. It’s only a matter of time before a blowout occurs.
As you may know from personal experience, such incidents impose themselves acutely and often without warning. This is the critical dilemma regarding the economic timebomb and its devasting exponential curve. The present normalcy lulls us into a dangerous complacency. Instead, we should realize that the shutdown has laid the groundwork for an implosion.
Undoubtedly, this is the most frustrating element of the Washington gridlock. Both Democrats and Republicans must realize that a financial crisis does neither party any good. Further, they must act with an extreme sense of urgency.
Nothing more than our stability and liberty is at stake.