What’s a government shutdown?
Lack of money forces non-essential U.S. government offices to close. Government funding shortages may result from delays in the passage of the federal budget for the following fiscal year. The closure continues until funding legislation passes.
A government shutdown will cease numerous governmental functions. While some organizations may operate on financial reserves, they will close if these funds are exhausted.
State, territorial, and local governments can also shut down, although “government shutdown” typically refers to the federal government.
Understanding a Government Shutdown
The U.S. federal government must decrease agency activities and services during a shutdown, shutting down non-essential operations and furloughing non-essential staff.
Some agencies operate during government shutdowns. These services threaten public health, life, or safety if interrupted. Essential staff in life- and property-safety departments stay employed. There is no funding bill to finance these workers’ work hours during the government shutdown.
DEA, TSA, CBP, and FBI employees are crucial. Since no one receives government funding, the government reserve and postal service will continue operations.
The government will continue to pay veterans’ benefits and unemployment insurance during a shutdown. These initiatives receive funding from allocated budgets and advanced Congressional allocations. Furloughed federal workers can file for temporary unemployment, although processing may take longer.
Government shutdowns disrupt various processing functions. Non-essential agencies may have to provide unpaid leave to staff if they cannot self-fund through fees or other income sources. The government shutdown will reduce services for most people. These closures are most visible in national parks and monuments.
The actual repercussions of a government shutdown are extensive. Processing new house, business, and school loans may take longer or be impossible. Social Security and unemployment insurance applications will also be delayed. Survivors of military deaths will not get death benefits or travel reimbursements.
Government shutdowns have additional effects. The U.S. Department of Agriculture cannot inspect certain food products, the Consumer Product Safety Commission cannot recall unsafe products, and travelers may not be able to obtain new passports (issued by the U.S. Department of State). Additionally, the CDC may not be able to follow sickness epidemics.
If the federal shutdown continues long enough, additional agencies will cease or cut public services, affecting more Americans.
Impact on Economy
Slow or halted government activities may impact private-sector firms. This government shutdown may cost the economy. A government shutdown’s overall cost and enduring impact on the economy may vary. The 2013 16-day government shutdown cost the U.S. economy $24 billion.
Federally furloughed workers can cut expenses. Many government workers are furloughed, and not spending as planned may hurt local businesses that service them.
Federal agency suppliers, such as office supply companies, will lose sales. Hotels, restaurants, and other hospitality services that serve U.S. national park and monument visitors will lose business during a closure.
Banks, albeit not government-controlled, cannot access loan application information during government shutdowns. Banks must review tax documents to verify income during loan applications. This can also affect the economy since banks’ loan processing costs affect their earnings, and the inability to finance a new house would affect the housing market.
Special Considerations
The president, the House of Representatives, the Senate, and the federal agencies and departments that receive financing must work together to fund the U.S. government’s budget, a lengthy and involved process. Economic downturns, political politics, and lobbyists can postpone budget approval.
Every year, government agencies request White House funding to operate. The president and his team amended these financial proposals and petitioned Congress. The House and Senate Appropriations Committees will evaluate the president’s financial proposal.
Committees usually revise the agency’s initial requests. Both the House and Senate considered a measure after agreeing on budget numbers. Floor votes follow debates. The bill then goes to the White House for signature or veto.
Real-World Example
At midnight on December 21, 2018, the U.S. government shut down. President Trump and Congress disagreed on spending for the fiscal year 2019. This closure affected 800,000 federal workers. Senator Patrick Leahy, Democratic vice chair of the Senate Appropriations Committee, presented a data-sheet revealing that 420,000 government employees, including 380,000 furloughed, would labor without pay. This was the longest U.S. government shutdown at 35 days.
Conclusion
- Failure to enact financing legislation for the following fiscal year leads to a government shutdown.
- Government shutdowns close non-essential offices and furlough specific, critical staff.
- Veterans’ and unemployment benefits continue.
- Extended government shutdowns hurt the U.S. economy.
