United States on the Edge of Government Shutdown

How we got here…again

In a time where political instability and economic uncertainties loom large, the United States faces another significant challenge: a potential government shutdown, expected to happen if an agreement in Congress is not reached by September 30, the end of the fiscal year. Normally, Congress is meant to pass a budget made of 12 appropriations bill and reauthorize a set of government programs before this deadline.

With only one of the twelve necessary appropriations bills passed, the clock is ticking. Whether it feels like alarm bells or businesses as usual from your individual perspective, things do tend to get messy on October 1, when our Congress fails to pass a budget. The financial health of the country has already taken a hit with Fitch Ratings downgrading the United States’ credit rating from “AAA” to “AA+” amid this turmoil, citing a steady decline in governance standards, particularly regarding fiscal and debt matters over the last two decades. Here I unpack the intricacies of the looming shutdown, describe its causes, potential impacts, political posturing opportunities, and the possible steps to avert it.

How Did We Reach This Point (Again)?

The origin of this crisis can be traced back to a failure of cooperation, specifically in the House. While there has been some progress in the Senate with appropriations bills coming out of committee through bipartisan votes — sometimes unanimously — the narrow House Republican majority has struggled to advance the necessary funding bills. You can track the status of each of these bills here.

An initial setback in this process came when House Republicans found themselves unable to finalize procedural votes necessary to advance debate on the floor about the appropriations bills. As the majority in the House, they are required to produce a rule and then a bill to debate. Republicans did not pass the rules necessary to vote on a budget prior the August district work period, so we are now in a more time crunched reality.

Another setback came last week when the House was supposed to vote on the Department of Defense’s budget. But Freedom Caucus members of the Republican Party challenged Speaker McCarthy on a number of fronts, including demanding he file formalities to enhance impeachment inquiry capacities against Joe Biden, which meant that the vote on the DOD bill was delayed and then eventually cancelled. House leadership tried to get a vote done twice in the third week of September, but again the fractured majority party failed to get majority support.

Additionally, a set of House Republicans have also said they will oppose efforts to pass a continuing resolution — which would act as a temporary extension of past funding bills allowing the government to stay open while longer-term bills are negotiated.

Despite a considerable alignment between the Senate, the White House, and House Democrats, progress is being stifled by several farther right House Republicans who are working to derail negotiations as the deadline approaches. These bottlenecks in the legislative process have pushed things closer to the brink, making a government shutdown come October 1 likely.

What Does a Government Shutdown Entail?

In the event of a shutdown, a substantial portion of the federal budget — which includes discretionary services such as education, transportation, infrastructure, national parks, interest on the national debt, and military funding — would come to a halt. This pause in operations represents about 27% of the budget, the slice governed by this annual appropriations process, as opposed to the 73% which is considered “mandatory” spending, encompassing programs like Social Security and Medicare.

However, if the shutdown occurs, there are impacts even in the mandatory programs as the workers necessary to carry out the functions in these areas are required to work without pay or be furloughed. The repercussions of shutdowns affect several sectors of society and the economy. Services like Social Security, Medicare, veterans’ services, and immigration processes would be paralyzed. Services that are already suffering from backlogs, such as passport applications and renewals would slow down.

The shutdown would also ripple through the business sector, causing delays in loan acquisitions for small businesses, a drop in mortgage applications, and a stall in international trade. We know this because in the past decade we’ve experienced two large, drawn out shut downs that negatively affected multiple sectors of the economy. In the 2018–2019 shutdown over $2 billion in small business loans were delayed because the Small Business Administration was hamstrung with furloughed employees. In the 2013 shutdown, mortgage applications dropped during the shutdown and mortgages processed through federal programs stopped.

Moreover, federal employees, including air traffic controllers, TSA agents, and national parks agents would either face furloughs or be required to work without pay, which would strain household budgets and impact local economies nationwide. These effects are not just localized to DC as about 80% of our federal workforce lives and works in other parts of the country. Overall, a shutdown would inflict a considerable blow to the nation’s economic output, echoing the detrimental effects witnessed in previous shutdowns in 2018–2019 and 2013.

The kicker to all of this, especially given the demands of House Republicans wanting to reign in overall government spending, is that restarting the government once it’s shuts down is itself a very expensive exercise. Something that even Republican Buddy Carter recently called out saying, “Closing down government agencies just to reopen them within days or weeks is practically flushing money down the toilet, which we can ill-afford to do.”

Could we avoid a shutdown?

The only viable option to keep the government operational while negotiations continue is with an agreement for short-term spending bill extension through a Continuing Resolution.

Democrat Bradley Schneider (D-IL) has called on Speaker McCarthy to allow the House to vote on the Senate bills that have already passed, likely knowing that this is not a realistic path. His argument is that, “Whether they pass or fail in the House, I think it’s important for the American people to know their elected Representatives — Republicans and Democrats — are at least trying to move forward.”

Republican Senator Mike Lee (R-UT) cracked a more down to earth joke predicting that in the final days ahead of the shutdown “the law firm of Schumer, McConnell, McCarthy, and Jeffries” would piece together a consensus package that would require a quick vote from Congress.

Why we keep getting to this point: Political Posturing and the Blame Game

Government shutdowns have become a field for political maneuvering, with each side trying to pin the blame on the other. On one hand, far-right House Republicans openly acknowledge utilizing this tactic to counter what they deem as “this administration’s woke, anti-American priorities.” The more combative parts of the GOP have embraced their role in driving the government to shut down in more detail. Eli Crane (R-AZ) unapologetically detailed their strategies to obstruct certain legislative actions, asserting a commitment to reducing government expenditure levels.

Returning from recess with a hardened stance, these Republicans are gearing up to employ even more stringent tactics in the hopes of securing concessions. This anticipated standoff threatens not only a potential government shutdown this fall but also the stability of Kevin McCarthy’s position as speaker.

Meanwhile, Democrats criticize these hardline Republican factions for risking the nation’s security and the well-being of American citizens through calculated, politically motivated maneuvers. Representative Ted Lieu (D-CA) articulated this perspective, lambasting the majority’s actions as, “just the latest in a series of reckless, irresponsible actions taken by this majority”.

While this high-stakes game of blame and bravado continues, a segment of the Republican representatives seeks to carve out a moderate path, advocating for a responsible approach to passing necessary appropriations bills. Congressman French Hill (R-AR) emphasized the importance of maintaining a strong negotiating stance with Senate Democrats and the Biden administration, urging the swift passage of these bills to avoid compromising their position. He noted to constituents that “Although Republicans do not control the Senate nor the White House, we do control our own appropriations process”. Some of these moderates are outwardly aware of the political costs of shutting things down. Congressman Mike Simpson (R-ID) wrote directly to constituents on September 24 saying, “Shutting down our government is never good politics or policy, and I will do everything in my power to avoid this disservice to the American people.”

Meanwhile, other representatives like Bob Good (R-VA) are preparing to redirect blame towards the Democrats, warning of another potential “Schumer Shutdown” if necessary financial restraints are not implemented. Nonetheless, he acknowledged in that very same piece that the responsibility also rests with Speaker McCarthy to navigate this process as a first step.

Finally, in the face of a looming government shutdown, both Republican and Democratic Congressional members have been resorting to a well-worn tactic: offering somewhat insincere assurances to their constituents that they will forgo their salaries in the event of a shutdown. This sentiment, grounded in the principle that if lawmakers fail to fulfill their duties, they should not receive compensation, might resonate as a show of solidarity with those affected by the shutdown. However, this gesture largely amounts to political posturing, a gesture that has never been implemented historically, but rather serves as reminder that lots of seemingly rhetoric around this topic, often lacks substantial weight or consequence.

With time rapidly dwindling, there is no prospect of passing all 12 appropriation bills through standard procedures. A continuing resolution is the most viable pathway to avert a government shutdown, yet it hinges heavily on the willingness of empowered Freedom Caucus Republicans to permit Speaker McCarthy to broker such a compromise. As they prioritize amplifying the urgency of an impeachment inquiry, it remains uncertain whether they will cede ground in the government shutdown dispute. Given the unpredictable nature of this faction, the nation finds itself in a tentative holding pattern, awaiting their next move.

How to talk about this with your family

For most kids a government shutdown is an abstraction that does not make a ton of sense. For many adults, that’s probably also the case. However, if you’ve got kids who are curious about the shutdown chatter in your house, here are some ways you can talk about it with them.

As always, I like to start with a few basic questions, “What have you heard about the shutdown?”, “What do you think about that?”, “What do you know?”, “Is there anything else that you think you should figure out about this to know more?”. I also like to ask myown daughter about any solutions or ideas she has to certain issues, knowing that she hasn’t fully thought these things out, but that children have a really neat way of problem-solving without the restraints of knowing more about how things tend to work in our system. After getting through those basics, here are more directed ways to think about talking about the shutdown with your family.

Do you ever think we have things like ‘shutdowns’ in day-to-day life where we can’t agree on things? Sometimes our legislators don’t agree on how to spend money when making laws for the country, when these disagreements can’t be resolved we sometimes have certain programs/places that “shutdown” while they work out their differences and come to a spending compromise. What do you think could help them agree sooner, so that people aren’t affected by the stops in services and jobs?”