WASHINGTON (AP) — The U.S. government is only hours away from a potential shutdown as Congress grapples with a failure to reach a compromise. With funding lapsing at 12:01 a.m. Wednesday, prospects for resolving the standoff appear dim.
Republicans have proposed a short-term funding measure extending government operations until November 21. However, Democrats are pushing for the inclusion of provisions addressing healthcare, notably reversing cuts to Medicaid from President Trump's recent budget bill and extending tax credits that aid millions in purchasing health insurance via the Affordable Care Act. Republicans have deemed the Democratic demands a non-starter.
Negotiations show no signs of progress, with the House not expected to vote this week. A potential shutdown raises questions about the scope of federal operations and employee status.
What Happens During a Government Shutdown?
In the event of a shutdown, federal agencies must halt their non-essential functions and furlough most employees, known as non-excepted workers. However, essential personnel, deemed excepted, will remain on duty to protect public health and safety, albeit without pay until funding is restored.
During a 2019 partial shutdown, approximately 340,000 of the 800,000 affected federal workers were furloughed, while others remained at work under similar conditions.
Continued Operations During a Shutdown
Key services will still operate, including those provided by the FBI, CIA, air traffic controllers, and active-duty military personnel. Programs relying on mandatory spending, such as Social Security and Medicare, will continue uninterrupted, ensuring that seniors receive their benefits and can access healthcare.
Veterans Affairs facilities will stay open, processing claims and offering medical services during a shutdown. Importantly, postal services will not be affected, as the U.S. Postal Service operates independently of government funding.
Employee Compensation and Mail Services
Furloughed workers are guaranteed retroactive pay by a law passed in 2019 once the government resumes operation. However, they may face months without paychecks during the shutdown, putting financial pressure on many. Service members, too, would be compensated retroactively after the funding lapse.
What Services Will Be Disrupted?
Federal agencies enjoy discretion in determining which operations to freeze. For instance, during previous shutdowns, many agencies opted to minimize disruption, although some agencies have not updated their shutdown plans recently.
Plans indicate that agencies such as Health and Human Services would furlough a significant portion of staff. Operations like disease monitoring and direct medical services may continue, although public communications could be restricted.
Historical Context and Economic Implications
Prior experiences suggest that while short shutdowns have limited immediate economic impact, protracted interruptions can raise doubts about government roles and financial consequences for various programs. Historical data from Goldman Sachs illustrate minimal market reactions during past shutdowns, highlighting that major economic effects often manifest only over time.
Phillip Swagel, director of the Congressional Budget Office, previously noted that a continuous shutdown could hamper economic growth significantly. With a potential reduction in economic output projected at 0.15 percentage points per week, a shutdown would have cascading effects that might take time to fully comprehend.
