The article explains how the latest US government shutdown began after Congress failed to agree on a new federal budget. The government had aimed to tighten fiscal spending to reduce the growing deficit, but deep political divisions turned this goal into a prolonged deadlock, leaving key departments without funding. As a result, essential services such as airport security and food assistance programmes are at risk, showing how political decisions can directly disrupt economic stability.
In A-Level Economics, we often study fiscal policy as a neat tool for managing aggregate demand, but this situation shows what happens when theory meets political reality. The intended fiscal tightening has instead created uncertainty, lowering both business and consumer confidence — two major drivers of the multiplier effect. When people and firms lose trust in the system, spending and investment decline, leading to an even sharper fall in aggregate demand.
This case can also be seen as an example of government failure. A policy meant to promote fiscal discipline has ended up causing inefficiency, instability, and potential job losses. It’s a very good example of how in the real world, economics doesn’t operate in isolation — political friction and public sentiment can completely reshape the outcomes of even the most well-intentioned economic policies. This a evaluation point so often used in macroeconomics and this article very clearly highlights the gravity of this point.
Source: CNN Politics
