WASHINGTON, March 8 — Large swaths of the US government would be forced to stop operating at midnight on March 14 if Congress does not pass detailed spending legislation that would keep agencies running.
Why would the government shut down?
Congress is supposed to allocate funding to 438 government agencies before October 1, the start of the fiscal year. But lawmakers rarely meet this deadline and routinely pass temporary spending bills to keep the government operating while they finish their work. The current extension expires today, and funding for much of the government will lapse at that point.
President Donald Trump’s Republicans control both the House of Representatives and the Senate. They can pass legislation in the House with a simple majority — meaning without Democratic votes — but would need the support of at least seven Democrats in the Senate to clear the chamber’s 60-vote threshold for most legislation.
The two parties often are at odds over spending, with Democrats typically pushing for more money for domestic programmes like environmental protection and worker safety.
This time, the dispute has been complicated by Trump’s unprecedented effort to downsize the government. Trump has fired at least 25,000 federal workers and ordered agencies to prepare for more layoffs, and he has effectively dismantled consumer protection and foreign aid programmes authorised by Congress.
Democrats say Trump is violating laws that require the president to honour spending levels set by Congress, and insist that any spending bill must contain safeguards to prevent Trump from cutting programmes without authorisation. Republicans say Trump should be allowed to run the government as he sees fit.
What is the impact of a government shutdown?
There have been 14 shutdowns since 1981, according to the Congressional Research Service, many lasting only a day or two. The most recent one was also the longest, lasting 35 days between December 2018 and January 2019, during Trump’s first term in office, due to a dispute between the president and Congress over border security.
Hundreds of thousands of federal workers would be furloughed without pay and a wide range of services could be disrupted, from financial oversight to trash pickup at national parks.
Other workers deemed essential would remain on the job, though they also would not get paid.
Shutdowns that last only a few days have little practical impact, particularly if they occur over a weekend, but the broader economy could suffer if federal employees begin missing paychecks after two weeks.
A shutdown would directly reduce GDP growth by around 0.15 percentage point for each week it lasts, according to Goldman Sachs, but growth would rise by the same amount after the shutdown was resolved.
The 2018-2019 shutdown cost the economy about US$3 billion (RM13.2 billion), equal to 0.02 per cent of GDP, according to the Congressional Budget Office. Trump’s policies, such as his trade war with Canada and Mexico, are already unsettling businesses and investors, and a prolonged shutdown could create more uncertainty.
The dome of the Capitol is seen through a security fence in Washington December 20, 2024. — Reuters pic
What functions are considered essential?
Each department and agency has a contingency plan to determine which employees must keep working without pay.
The 2018-2019 shutdown furloughed roughly 800,000 of the federal government’s 2.2 million employees.
Shutdown plans prepared under Democratic President Joe Biden called for keeping border security agents, prison staff and prosecutors on the job, as well as those responsible for air travel. Military personnel would remain at their posts and Social Security payments would continue, but scientific research, financial regulation, child care and housing subsidies would be disrupted.
In the 2018-19 shutdown the Trump administration kept the US’ 63 national parks open, though public restrooms and information desks were closed and waste disposal was halted.
Those contingency plans are subject to change, and Trump might use a shutdown to further pare federal payrolls and shutter programmes he does not support.
What about the national debt?
The shutdown showdown is a prelude to higher-stakes legislative battles ahead over Trump’s push for sweeping tax cuts and what Congress will do about the nation’s US$36 trillion in borrowing when the federal government hits its self-imposed debt ceiling sometime later this year.
Trump is pushing Republicans to increase spending for border security and defence, while also extending his signature 2017 tax cuts, which are due to expire at the end of the year. Trump has also called for Congress to create several new tax cuts as well.
Independent budget experts say that would increase the national debt by US$5 trillion to US$11 trillion, which would push up borrowing costs that are already eating up a growing share of federal spending. Interest payments accounted for 13 per cent of the US$6.8 trillion budget last year, according to the Congressional Budget Office, more than the country spent on national defence, and are projected to account for 17 per cent a decade from now.
House Republicans have passed a budget plan that would cut taxes by US$4.5 trillion and cut domestic spending by US$2 trillion over the next decade, though they have yet to specify which programmes would be affected. Democrats and advocacy groups warn those cuts could take a heavy toll on social services including the Medicaid health programme for the poor.
In the Senate, Republicans have passed a budget plan that does not account for the tax cuts.
Congress also will have to raise the national debt ceiling in the coming months to ensure the government can continue to pay its bills. A US debt default would likely have severe consequences, roiling global financial markets and plunging the country into a recession. — Reuters
