US Government Shutdown: What It Means and Who Is Affected? Everything You Need to Know

The US government shut down its operations on Wednesday for the first time in six years, plunging the country into a severe crisis after the Senate failed to pass a funding bill. The funding deadline expired at 12:01 AM Wednesday, following a 55-to-45 Senate vote. Compounding the situation, President Donald Trump escalated tensions by threatening the permanent termination of more federal employees, rather than the usual temporary furlough.

A government shutdown occurs when Congress fails to pass new spending legislation before the previous laws expire. While shutdowns have become somewhat familiar in recent decades, this one is particularly acute. Unlike previous closures, Congress failed to approve any of the 12 appropriations bills that fund federal agencies, making this shutdown more comprehensive, especially as the Trump administration planned to revise the emergency continuity plans typically followed by federal agencies.

Who Stays On the Job and Who Stops?

Despite the widespread nature of the closure, some essential functions and independently funded bodies continue operations:

• Essential Activities: Critical functions such as the military, security, and food inspection continue.

• The Presidency and Affiliated Bodies: The US Presidency and associated entities like the Office of Pardons and the US Trade Representative remain operational.

• Independently Funded Agencies: The Federal Reserve (Fed) and bodies like the Consumer Financial Protection Bureau (CFPB) continue to operate as they do not rely on annual Congressional appropriations.

• Quasi-Governmental Entities: Entities like Amtrak, the US Postal Service, Fannie Mae, and Freddie Mac have independent funding sources and remain functional.

• Passport Offices and Consulates: These offices continue to operate as long as they are funded by user fees.

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Impact on Federal Employees and Public Services:

1. Federal Employees (Temporarily Unpaid): In past shutdowns, about 40% of federal employees were furloughed. Now, all employees (furloughed and essential) stop receiving pay temporarily. They are paid retroactively after the shutdown ends, according to the 2019 "Fair Treatment for Federal Employees" Act. However, Trump's threat of "permanent termination" represents an unprecedented escalation.

2. Air Travel: Although agencies like the Federal Aviation Administration (FAA) and the Transportation Security Administration (TSA) remain operational, a lack of pay could lead to employee absenteeism, causing airport delays and disruptions.

3. Social Security and Healthcare: Social Security payments and Medicare/Medicaid benefits continue. However, some administrative services, like correcting records or issuing new cards, may be delayed. Furthermore, a delay in the inflation report could affect the calculation of cost-of-living adjustments for beneficiaries.

4. Internal Revenue Service (IRS): The IRS stops answering customer service calls and ceases most tax administration operations. However, tax deductions and payment deadlines remain in effect without postponement, placing an added burden on taxpayers.

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Economic and Financial Data at Risk:

The suspension of work at federal statistical offices is one of the most critical repercussions of the shutdown for the economy and policymakers:

• Delay of Key Reports: The Bureau of Labor Statistics (BLS) is expected to cease operations, delaying vital reports such as the September Jobs Report and the Inflation Report in mid-October.

• Deterioration of Data Quality: The impact extends beyond delayed publication to the data collection process itself, weakening the quality of information relied upon by the Federal Reserve and investors for decision-making.

• Investment Committee: The Committee on Foreign Investment in the United States (CFIUS) may halt operations, delaying decisions on major mergers and acquisitions.

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Regulatory Agencies:

Regulatory activities are significantly affected: Most investigation activities at the Federal Trade Commission (FTC) cease, and the Securities and Exchange Commission (SEC) stops reviewing and approving the registrations of financial advisors and investment firms. Only the Commodity Futures Trading Commission (CFTC) may continue market oversight, deeming it "essential" to avoid "massive disruptions and losses in the private economy."