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Government Shutdown Could Derail Recovery

NEW YORK ( TheStreet) -- As the clock ticks down to the looming government shutdown, many analysts fear a rapid decrease in consumer confidence and spending could potentially derail the U.S.'s fragile economic recovery.

If lawmakers are unable to agree on a new budget measure before the current continuing resolution expires just after midnight on Saturday, federal departments and agencies will be required by law to execute a government shutdown.

Passage of an appropriations bill or an extension on negotiations would effectively forestall the shutdown, but the budget talks between Republicans and Democrats seem far from resolution.

If the government is shuttered, federal departments and agencies would have to comply with contingency plans set forth by the Antideficiency Act of 1870, and therefore would have to cease all operations, the Office of Personnel Management explained.

Hundreds of thousands of federal employees would be told to stop working, the economic effects of a shutdown would reverberate throughout the nation, and the longer it lasts, the more dire the financial repercussions, Gus Faucher, director of macroeconomics at Moody's Analytics, told TheStreet.

"If it starts stretching to two to three weeks, there is a potential for a negative impact on the economy, particularly through confidence," Faucher said. "If people feel that the government can't really handle this and can't get their house in order, then we could see consumers get a little bit anxious."

Many federal employees wouldn't be allowed to work, not even as unpaid volunteers for the government, and would be placed in a temporary non-pay status.

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