With Congress barreling toward a government shutdown, many Americans are wondering how it could affect them. Here’s a guide to what you can expect.
A government shutdown happens when Congress doesn’t approve funding for the federal government by the time the new fiscal year starts on October 1. Each year, Congress must pass the 12 appropriation bills that make up the discretionary spending budget and set funding levels for federal agencies.
If lawmakers fail to enact all or some of the appropriation bills, many government operations grind to a halt, resulting in a full or partial government shutdown until Congress acts. However, government functions that are deemed essential will continue.
Each federal agency comes up with a contingency plan that outlines which of its functions will continue during a shutdown and which will stop, as well as how many of its employees will continue working and how many will be furloughed until the shutdown ends.
Because many federal workers are off the job during a government shutdown, many services are stopped or slowed, disturbing the day-to-day life for many Americans.
Notably, Social Security payments to seniors, Americans with disabilities and others would continue to be distributed. The Postal Service would also continue regular service. Some states would use their own funds to keep open certain national parks, like the Grand Canyon.
Here are some examples of how a shutdown could affect you.
When a shutdown occurs, millions of federal employees and military service members do not get paid until it ends.
Employees deemed “essential,” such as those in services that protect public safety or national security, keep working. In the past, this included services such as federal law enforcement and air traffic control.
Non-essential employees are furloughed, or temporarily suspended.
Both groups must pull from savings or find other ways to stretch their dollars, not only until the shutdown ends but until back pay arrives. The number of workers affected depends on if the shutdown is full or partial. If some appropriation bills pass on time, those corresponding federal agencies will have approved funding and continue operating as normal, resulting in only a partial shutdown.
During the last government shutdown in 2018-19, an estimated 420,000 federal employees worked without pay and another 380,000 were furloughed. But depending on which agencies are affected, these numbers can be much higher.
Government contractors are even worse off. Unlike federal workers, contractors have no guarantee of getting back pay once the government reopens. Contractors number in the millions and include firms that work for NASA, the Department of Homeland Security, Federal Aviation Administration, and other federal agencies, providing a range of services such as IT or infrastructure repair.
On a national scale, government shutdowns can have far-reaching economic consequences, hampering growth and promoting uncertainty, especially if they drag on. Some of these costs include raising the unemployment rate, lowering the growth in gross domestic product (GDP), and raising the cost of borrowing. Each week of a government shutdown could cost the US economy $6 billion and shave GDP growth by 0.1 percentage points in the fourth quarter of 2023, according to estimates by EY.
A shutdown also renders the state of the US economy unclear. In such an event, the Bureau of Labor Statistics stops releasing data, such as key figures on inflation and unemployment, making it challenging for the Federal Reserve and investors to interpret the economy and make decisions – decisions that are especially crucial at the moment as the Fed is at a pivotal point in its campaign to defeat high inflation.
Business as usual across the country is affected too. During the last shutdown, the government paused two major Small Business Administration loan programs, which distribute nearly $200 million per day to small and midsize US businesses. New business also stalls. In 2019, pending company mergers slowed because the Securities and Exchange Commission (SEC) wasn’t fully staffed and initial public offerings were put on pause after the SEC stopped reviewing and approving filings.