The U.S. government has officially shut down as Congress failed to pass funding legislation before the midnight deadline on Tuesday.
The Senate attempted to pass two separate bills to keep the government funded, one supported by House Republicans and an alternative resolution proposed by Democrats. Unfortunately, both bills fell short of the 60-vote threshold required for approval.
As a result of the shutdown, nonessential services have been halted, leading to furloughs for many federal workers while essential staff continue to work without pay. This will also cause delays in benefit programs, financial aid, IRS verification, and could disrupt travel plans.
What occurs during a government shutdown?
Federal workers will be most impacted by the shutdown, with the potential for mass firings as agencies consider layoffs. The delivery of government services and programs will also experience ripple effects.
Immediate effects include the closure or limited operation of national parks, delays in federal student aid processing, postponed food and drug inspections, and hindered IRS verification processes affecting mortgages, loans, and tax refunds.
Services that will continue with limitations include:
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Flights will operate, but potential delays may arise due to staff shortages. Social Security, Medicare, and unemployment benefits will continue, but with possible interruptions. Food benefits programs like SNAP and WIC will be sustained for a limited time.
Unaffected services include:
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Postal service, federal student loan payments, public schools, and Amtrak operations will continue unaffected by the shutdown.
The economic impact of the shutdown may be felt depending on its duration. Immediate effects include the suspension of federal economic data releases, which guide market decisions and business strategies.
How did the government shutdown transpire?
Each year, Congress must pass spending bills to fund government programs by October 1st. Failure to do so results in a government shutdown.
The current deadlock stems from disagreements over extending Obamacare subsidies and reversing Medicaid cuts. Efforts to pass funding bills have been unsuccessful, leading to the shutdown.
Negotiations between congressional leaders and President Trump have failed to resolve the impasse, resulting in the current shutdown.
Duration of the government shutdown
The length of the shutdown remains uncertain, with previous shutdowns lasting from a few hours to 35 days. The current impasse mirrors past disputes over funding priorities.
For more insights on the impact of government shutdowns, refer to our latest Smart Money podcast episode.