Washington Edition
Government shutdown at day eight
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This is Washington Edition, the newsletter about money, power and politics in the nation’s capital. Today, domestic policy reporter Gregory Korte looks at the growing impact of the government shutdown. Sign up here and follow us at @bpolitics. Email our editors here.

Brace for Impact

Most US government shutdowns last only hours or a few days, sometimes over a long weekend when hardly anyone notices. Then when Congress passes new spending, there’s nothing to reopen — because the government never had time to fully shut down.

This one is different. As the federal shutdown enters its second week, the consequences are starting to feel real. 

More than a quarter million federal employees missed their scheduled paychecks this week, with another two million set to go without pay if the impasse extends into a third. Some unpaid air traffic controllers are calling in sick, causing flight delays. Vendor invoices are piling up. The regional economy of Washington, DC, already teetering toward recession territory, is seeing spillover effects from lost incomes and job security. 

Closed sign in front of the National Gallery of Art in Washington. Photographer: Stefani Reynolds/Bloomberg

Even the things that furloughed federal workers once took for granted — like having a job to come back to and getting back pay once the shutdown ends — now look uncertain. 

A draft legal memo from the White House budget office argues that back pay isn’t guaranteed — a reversal of four decades of precedent and a challenge to a 2019 law that made such payments automatic. President Donald Trump has gone further, saying some workers “don’t deserve to be taken care of.”

The administration is also weighing laying off workers and canceling federal grants, steps that would turn a temporary lapse in funding into a lasting loss of jobs and services. 

What began as a now-routine Washington standoff over funding with few tangible effects has become a national concern. Federal workers are feeling it first. The rest of the country may not be far behind. Economists warn that each week the shutdown continues costs about a tenth of a percentage point of GDP.  

This might be a good time for a reminder that there are at least 535 federal employees who aren’t feeling a personal financial toll. Members of Congress continue to get paid under the 27th Amendment to the Constitution, which prevents their salaries from changing during their terms. 

Originally meant to prevent members from voting themselves a pay raise without facing voters, it now insulates them from the cost of their inaction.—  Gregory Korte

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Don’t Miss

Former FBI Director James Comey pleaded not guilty to charges that he lied to lawmakers and obstructed a congressional proceeding, a watershed moment in Trump’s push for legal action against his perceived enemies. 

Federal Reserve officials showed a willingness to lower interest rates further this year, but many expressed caution driven by concerns over inflation at their policy gathering last month.

Federal authorities arrested a 29-year-old man on charges that he intentionally started what became the Palisades Fire, which killed 12 people and destroyed thousands of homes in Los Angeles. 

With little fanfare, Trump offered the tiny Gulf nation of Qatar a prize many nations have sought but few have been given: a security guarantee pledging US help if it comes under attack.

Applications for mortgages to buy a home or refinance both fell for a second week, marking a swift reversal of what had been a hopeful sign of a revival in the US housing market.

The US government logged a $1.8 trillion budget deficit for the 2025 fiscal year, little changed from 2024 despite a surge in tariff revenues, according to the Congressional Budget Office.

The federal judge appointed by Trump who temporarily blocked his plan to send troops to Portland has triggered his fury and a legal battle that’s testing the limits on using the military in American cities.

The Centers for Disease Control and Prevention is postponing a late October meeting of an influential vaccine panel that’s been weighing changes to long-standing advice on childhood shots.

Bloomberg Economics Washington: Join us Oct. 14 for a deep dive into the outlook for the economy and what it means for the Federal Reserve. Register here.

Watch & Listen

Today on Bloomberg Television’s Balance of Power early edition at 1 p.m., host Joe Mathieu interviewed Republican Representative Jason Smith, chair of the Ways and Means Committee, on where things stand on a stopgap funding bill and work on a full-year plan.

On the program at 5 p.m., he talks with House Speaker Mike Johnson about the stalemate that’s closed the government and the president’s threats to fire some federal workers or deny them back pay.

On the Big Take Asia podcast, host K. Oanh Ha speaks with Bloomberg’s Paul Jackson about Sanae Takaichi, who is now on track to become Japan’s first female prime minister, her path to power and what her leadership could mean for Japan’s economy and its relationship with the United States. Listen on iHeart, Apple Podcasts and Spotify.

Chart of the Day

A monthly survey conducted for Fannie Mae shows that a large majority of Americans — the highest share since the survey was started in June 2013 — say that their household income is lower or about the same compared to last year. The share who said that their income is higher than it was a year ago slipped to 14%, the lowest percentage of respondents in the 15-year history of the survey. Two years ago, the share reporting income gains was 10 percentage points higher, and over the survey’s history, nearly a quarter of respondents typically said that their household income was higher than compared to 12 months prior. The data highlights the divergence in the economy, with a small share of individuals seeing more prosperity, while the rest experiencing a decline in living standards as their pay isn’t keeping up with still relatively robust inflation. — Alex Tanzi

What’s Next

The Nobel Peace Prize is scheduled to be awarded on Friday.

The University of Michigan’s preliminary reading of consumer sentiment in October is out Friday.

The NFIB’s small-business optimism index for September will be released Oct. 14.

The Fed’s Beige Book survey of regional businesses will be released Oct. 15.

The National Association of Home Builders housing market index will be published Oct. 16.

Industrial Production in the US for September is scheduled to be reported Oct. 17.

The summit of the Association of Southeast Asian Nations opens Oct. 26 in Malaysia.

Seen Elsewhere

  • An investigation ordered by Defense Secretary Pete Hegseth has targeted almost 300 Pentagon employees over online comments made after shooting death of conservative activist Charlie Kirk, the Washington Post reports.
  • Human brains evolved to build social networks, but research shows the cognitive demands of maintaining those bonds limits the number of individuals in a given social group, the Wall Street Journal reports.
  • The centuries-old mystery of loud, random booms erupting from Seneca Lake in central New York may be partially solved by the discovery on large craters hundreds of feet below the surface, the New York Times reports.

(Correction: In yesterday’s newsletter, Marjorie Taylor Greene’s name was misspelled in the first paragraph.)

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