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When lawmakers fail to pass legislation funding the federal government before the end of the fiscal year on September 30, 2023, there will be a Federal Government Shutdown. Because Congress is not anticipated to enact the 12 appropriations bills that finance government operations before the start of the next fiscal year, it looks like a government shutdown will occur on October 1, 2023.

Federal Government Shutdown

When non-essential U.S. government offices are unable to continue operating because of a lack of financing, a Federal Government Shutdown occurs. When the federal budget that will support the government for the future fiscal year is delayed, money shortages often result. Up until financing legislation is enacted, the shutdown is still in place.

A government shutdown will result in the suspension of numerous publicly funded programs. Some businesses may continue to operate while using their cash reserves, but if these funds are depleted, they will also shut down. The phrase “government shutdown” is often used to refer to the federal government, however, Federal Government Shutdown may also occur at the state, territorial, and municipal levels of government.

Why did the Government Shutdown 2023 happen?

Federal agencies are prohibited from incurring any debt or making any expenditures under the Antideficiency Act (first enacted in 1884 and revised in 1950). Federal agencies must stop all non-essential operations if Congress doesn’t pass the 12 yearly spending bills before they may resume them. We have a federal shutdown right now. 

Only the agencies lacking funds must shut down in the event that some but not all of the 12 appropriations bills are passed by Congress; this is referred to as a partial shutdown.

How common are government shutdowns?

Four shutdowns lasted more than one business day. In 1995-1996, President Clinton and the Republican Congress disagreed on spending levels, shutting down the government twice for 26 days. The Affordable Care Act financing dispute in 2013 caused a 16-day closure. In December 2018 and January 2019, a border wall funding issue caused a 35-day partial closure since Congress had already approved five of the 12 authorization bills.

Federal Government Shutdown

What happens when that occurs?

Many federal employees are told not to work during shutdowns, even if a 2019 law would provide them back pay. Law enforcement and air traffic controllers work for the government but are not paid until Congress ends the partial government shutdown. This covers just 25% of federal spending authorized by Congress annually.

During a shutdown, Social Security benefit offices may limit their services, but Congress authorizes Social Security and Medicare under legislation that does not need annual permission. The Treasury may also make timely US Treasury debt interest payments.

What about the courts and Congress?

The Administrative Office of the U.S. Courts says during a shutdown, courts use fees they’ve earned instead of appropriations and postpone new hiring, non-case-related travel, etc. The courts have concluded that they may continue a constitutionally protected activity if the shutdown lasts long and those funds are utilized. 

The Congressional Research Service says Congressmen cannot be furloughed due to their constitutional duties and fixed salary budgets. Only congressional personnel “required to support Congress with its constitutional responsibilities or those necessary to protect life and property” may work. Even if they are paid retroactively, legislative personnel are not paid during shutdowns. 

Why does a federal Government Shutdown look likely in the fall of 2023?

In June 2023, Congress and President Biden enacted and signed the Fiscal Responsibility Act, increasing the federal debt ceiling and restricting defense and non-defense allocated expenditure for fiscal years 2024 (which starts October 1, 2023) and 2025 with Republican backing. Congress was supposed to pass 12 bills with agreed-upon money. All 12 bills were adopted bipartisanly by the Senate Appropriations Committee. House Republicans were dissatisfied with the compromise.

What is a continuing resolution?

The GAO identified 47 Beltway “CRs” between 2010 and 2022. Days to little about six months. Although they keep the government functioning, the GAO said they may be difficult for federal agencies to manage since they often have to prepare for a government shutdown because they can’t be sure a CR will pass, they may disrupt recruitment efforts, and they make planning difficult. 

A fall continuing resolution might avert a shutdown if the House adopts it.

A unique part of the Fiscal Responsibility Act prevents Congress from funding the government beyond December 2023. A CR would inevitably cut military spending significantly on January 1, 2024.

What impact do Government Shutdowns have on the overall Economy?

A few-day closure is annoying and diminishes public trust in U.S. lawmakers’ ability to conduct the people’s business, but it seldom affects the economy. A protracted outage might generate momentary but serious issues. Goldman Sachs believes that a shutdown would cut GDP growth by 0.2 percentage points every week and increase it by the same amount in the quarter thereafter.

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