Five Facts to Know: The Impending U.S. Government Shutdown
A US government shutdown looms. Congress has until midnight on Saturday, September 30, to pass a continuing resolution (CR) that allows the federal government to continue operations. As Congressional debates continue over spending and the inevitability of a shutdown grows, here are five facts to know about US government shutdowns:
1. Government Shutdowns are not uncommon but don't happen often
According to Congressional data, the government is on the verge of its 22nd shutdown over the last five decades, most of which were only for a couple of days. The longest shutdown on record began in December 2018 when the US government shutdown for a total of 35 days—and faced a partial shutdown just three weeks later—due to a stalemate over federal funding for a border wall between the US and Mexico.
2. Intra-party dynamics in the House Republican Caucus is the primary driver of this shutdown
In the past, shutdowns were often focused on disagreements between the President and the party in control of Congress. In this instance, the disagreement stems more from the numerous factions within the House Republican Caucus over government spending and the nation’s ballooning debt as well as border security and funding and aid for Ukraine.
3. A Shutdown will impact the U.S. economy
The Congressional Budget Office estimated that the five-week partial government shutdown in 2018-2019 reduced economic output by USD 11 billion in the following two quarters—including USD 3 billion that the US economy never regained. For context, the US GDP in 2019 was USD 21.38 trillion. Moody's Analytics estimated that the 2013 full government shutdown reduced GDP growth by $20 billion.
The degree to which a shutdown would affect the US economy depends on the length of a shutdown, but what remains clear is that it risks exacerbating existing domestic challenges around growth, unemployment, and borrowing costs with far-reaching economic consequences.
4. Federal employees and private-sector federal contractors would feel the most immediate effects of a shutdown
A large portion of the federal workforce would be furloughed. Any federal workers deemed “not essential” are unable to work during a shutdown. While federal employees are typically paid after the shutdown ends, private-sector contractors may go without pay even after the shutdown ends.
A shutdown would also affect small businesses. According to the Government Account Office, a shutdown could disrupt an average of USD 13 billion per week in federal contracts—nearly USD 3 billion of which goes to small businesses. The Small Business Administration would also be unable to process new business loans.
5. U.S. voters will feel the shutdown as midterm elections near
Families on federal assistance would feel the impact most bluntly. In past shutdowns, however, Congress has passed legislation to extend the federal agency's ability to send benefits amidst the shutdown.
The impact on travel and recreation will also be felt by many Americans. National Parks and other federal lands will close. And while TSA and FAA employees generally keep working, service levels will suffer, creating longer lines and disruptions to travel.
