US Govt to Shutdown on October 1: What Does it Mean? How Does it Impact Americans? – News18

Large parts of the US government could temporarily shut down on October 1 if the US Congress fails to approve spending bills due to a dispute between lawmakers and far-right and right-leaning Republicans within the Republican Party.

Why Will the US Government Shut Down?

The US Congress has to allocate funding to 438 government agencies each fiscal year, according to a report by Reuters. The fiscal year ends on September 30 and if the bills are not passed before the start of the new fiscal year, then those agencies will stop operating normally.

At least 20 shutdowns have been reported since the 1970s, Reuters said citing the Congressional Research Service. The last shutdown was during the Trump administration between December 2018 and January 2019, lasting 35 days, due to a dispute over border security.

Lawmakers often temporarily push that deadline back by extending agencies’ current funding levels in a “continuing resolution” so they can continue negotiating, Reuters said in its report.

How Does it Impact Everyone in the US?

A shutdown means at least hundreds of thousands of federal workers would be discharged without pay. Services like passport applications to trash pickup at national parks will be disrupted if there is a shutdown.

Essential workers would remain on the job but they would not get. Services like mail delivery, tax collection and USdebt payments would continue.

Shutdowns do not have any or little practical impact if they occur over a weekend, but the American economy would suffer if federal employees begin missing paychecks after two weeks.

This will also impact the US’ GDP growth by around 0.15 percentage points for each week it lasts, according to banker Goldman Sachs. The fall would be recuperated by a rise in the same amount once the shutdown was resolved. The Congressional Budget Office says the 2018-2019 shutdown cost the economy about $3 billion, equal to 0.02% of GDP of the US.

Is This Different from the Debt Limit Standoff?

Many may think this is similar to the debt limit standoff between the US government led by President Joe Biden and US House Speaker Kevin McCarthy. The debt limit is a cap set by the US Congress which tells the US government how much money it can borrow whereas a shutdown happens when the US government has not had more money allocated to its budget by Congress.

During a debt limit standoff, the US Treasury could fail from paying its debts, leading to a debt default and a US debt default would have severe global consequences. It would plunge the US into recession and upturn global financial markets.