What Does It Mean That the US Government Will Shut Down on October 1? What is the effect on Americans?

If the US Congress is unable to pass budget bills as a result of a disagreement between legislators and far-right and right-leaning Republicans within the Republican Party, significant portions of the US government may temporarily shut down on October 1.

WHAT IS CAUSING THE US GOVERNMENT TO SUSPEND?

Each fiscal year, 438 federal departments must get financing from the US Congress, according to a Reuters study. If the laws are not enacted by the beginning of the next fiscal year—which ends on September 30—those agencies will cease to function regularly.

Since the 1970s, there have reportedly been at least 20 shutdowns, according to Reuters, citing the Congressional Research Service. The most recent shutdown occurred between December 2018 and January 2019 under the Trump administration and lasted 35 days as a result of a disagreement over border security.

According to Reuters, lawmakers often postpone that deadline by prolonging agencies’ present budget levels in a “continuing resolution” so they may continue to negotiate.

WHAT IMPACT DOES IT HAVE ON EVERYONE IN THE US?

In the event of a shutdown, at least 400,000 government employees would be let go without compensation. If there is a shutdown, services like passport applications and garbage collection at national parks would be affected.

Even if they would not be hired, necessary staff would stay on the job. Mail service, tax collection, and payments on US debt would all continue.

Weekend shutdowns have little or little practical effect, but if government workers start missing paychecks after two weeks, the American economy would suffer.

According to bank Goldman Sachs, this will also have an effect on US GDP growth, slowing it down by around 0.15 percentage points for each week it continues. Once the shutdown was over, a gain in the same amount would make up for the decline. According to the Congressional Budget Office, the 2018–2019 closure cost the economy $3 billion, or 0.02% of US GDP.

DIFFERENCE FROM DEBT LIMIT STANDOFF: IS THIS?

Many people would compare this to the US government’s debt ceiling impasse between President Joe Biden and US House Speaker Kevin McCarthy. The debt limit is a ceiling imposed by the US Congress that limits the amount of money the US government may borrow, while a shutdown occurs when the US government’s budget has not received further funding from Congress.

A US debt default during a debt ceiling conflict would have serious worldwide repercussions because the US Treasury could be unable to pay its bills. It would trigger a recession in the US and shake up global financial markets.