Why is the US on the verge of a shutdown? What will it look like?

It’s looking like the US is hurtling towards a chaotic Christmas. Chaotic because it appears that America is heading for a shutdown this weekend after the US House of Representatives rejected a Republican-led funding bill aimed at averting the closure, with federal agencies due to run out of cash on Friday night and cease operations starting Saturday (December 21).

As the US Congress debates a way forward to keep government employees on the job, rather than send them home, we take a closer look at what exactly is a US shutdown, why it happens in the Western nation and what would it look like.

What is a US government shutdown?

As the name suggests, a shutdown is when the government ceases to operate. In the US, a government shutdown occurs when all federal agencies stop functions that are deemed “non-essential” until money is appropriated for the next fiscal year.

While it sounds like very bad news, a shutdown in the US has become a kind of bargaining tool for political leaders and a problem that occurs way too often — there have been 14 since 1981.

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Why does a US shutdown occur?

Such a phenomenon occurs owing to America’s federal system of governance. US Congress is meant to allocate funding to 438 different government agencies before October 1, the start of the fiscal year. However, US lawmakers don’t meet this deadline and pass temporary spending bills to keep the government running.

This time around, the temporary bill ends on Friday (December 20) at midnight owing to which Republicans and Democrats have to prepare legislation that would push the deadline to March 14. If this measure isn’t passed by both Houses — the Republican-controlled House of Representatives and the Democratic-majority Senate — until Friday midnight, then funding would lapse and at 12.01 am on Saturday, the US would be in the midst of another shutdown.

And it seems that the US is on the path to a shutdown, as the US House of Representatives , controlled by the Republicans, rejected the funding bill as they claimed that there were numerous expensive add-ons forced into the package.

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What would a US government shutdown look like?

If the lawmakers fail to pass legislation, then a shutdown is inevitable. In a shutdown, government offices continue essential work, but tasks deemed non-essential are put on hold, salaries are stopped and many workers are furloughed until Congress passes new funding.

According to Shai Akabas, executive director of the Bipartisan Policy Centre’s economic policy programme, approximately 875,000 federal workers could be furloughed, while 1.4 million would continue working.

Several employees will be told not to report to work, barring those who provide key services such as air traffic control and law enforcement. Also, according to the American Federation of Government Employees (AFGE), which is a major federal employee union, a US government shutdown would mean that essential staff would be working through the Christmas season without a pay cheque.

While transport employees will have to work, absenteeism could be a problem, making travel during the holidays painful. For instance, the Transportation Security Administration (TSA) won’t be able to hire new airport security screeners during the busy holiday travel season.

A US shutdown would also affect America’s military. While approximately two million military personnel would remain at their posts, around 800,000 civilian employees at the Pentagon would be furloughed.

Contracts awarded before the shutdown would continue. However, new contracts, including renewals or extensions, would not be awarded.

Those who wish to secure a new Social Security card could experience delays. Environmental and food safety inspections have been delayed in past shutdowns. New loans for small farmers across the US would be halted. National parks, monuments and other sites would also be closed to the public.

Won’t a US shutdown save money?

It would seem that a shutdown would save money but that’s not the case. Data shows that shutdowns tend to cost money. For instance, putting contingency plans in place has a real cost.

In addition, many user fees and other charges are not collected during a shutdown, and federal contractors sometimes include premiums in their bids to account for uncertainty in being paid.

While many federal employees are forced to be idle during a shutdown, they have historically received and are now guaranteed back pay, negating much of those potential savings.

Shutdowns also carry a cost to the economy. The Congressional Budget Office (CBO) estimated that the 2018-2019 shutdown reduced Gross Domestic Product (GDP) by a total of $11 billion, including $3 billion that will never be recovered.

Thibault Denamiel, a fellow at the Centre for Strategic and International Studies, told AFP, “Shutdowns have been shown to have a broader impact on the US economy, reducing growth by around 0.2 percentage points once private sector effects are taken in.”

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan public policy non-profit, was also of the opinion that a shutdown is not good for the economy. In a Wall Street Journal report, she was quoted as saying, “A government shutdown, where we end up paying people not to work, is precisely at odds with the important objective of DOGE, which is to increase efficiency.” DOGE is the Department of Government Efficiency, a new body created by Donald Trump and co-chaired by Elon Musk.

How have past US shutdowns fared?

If the US does witness a shutdown, this would be the 22nd such incident since 1977. Many shutdowns have been only a day old.

However, the longest shutdown was for 34 full days from December 21, 2018, to January 25, 2019. During that shutdown, national parks remained open, but trash started piling up as employees were furloughed. TSA employees started calling in sick, leading to delays at airports.

With inputs from agencies