What is a Government Shutdown?

Understanding Government Shutdowns in the United States

In the US, a Government Shutdown is when funding isn’t secured to keep parts of the government running.[1][2][3][4][5][6]

This happens when Congress (i.e. the house and senate) can’t agree on a budget, or when the President won’t sign off on a budget produced by Congress, before the end of the annual federal budget cycle (the cycle ends on Oct. 1st each year).

When a shutdown does occur it affects programs and workers dependent on annual discretionary spending, however programs deemed “essential,” programs funded by multi-year spending bills, programs that are self funding (for example by user fees), and programs funded by mandatory spending not subject to annual appropriations generally continue to operate (although in many cases at reduced budgets).

This creates a situation where some non-essential federal employees are furloughed, employees who work in essential fields work without pay, and eventually funding runs out for programs (affecting for example food assistance, which uses discretionary funding, but not Social Security, which uses mandatory funding).

Then, when the Government is reopened and a budget is signed, employees who worked during the shutdown get back pay and federal programs get funded.

That is the simple version, the reality is there is a lot of complex things to consider, such as the fact that many programs are funded from more than one source (for example state and federal government), each program has its own way of dealing with a shut down, and even programs mostly funded by mandatory spending can be effected in a prolonged shutdown.

See Q&A: Everything You Should Know About Government Shutdowns at CRFB.org for an in-depth Q&A, or keep reading for a simple overview.

FACT: In the face of a shutdown Congress can pass a temporary funding bill called a Continuing Resolution (CR). This allows the government to be funded while Congress and the President continue to debate the budget.

Why Does the Government Shut Down?

The government requires incremental funding for “discretionary spending” (spending that isn’t “mandatory spending” under law), this funding must be granted via appropriations legislation.

Since Congress is in charge of legislation in the United States, they must create and approve budgets each year.

If Congress doesn’t complete the budget process in time there is an effective shutdown as funding for any federal programs and employees dependent on discretionary spending runs out.

With that in mind, what often happens in practice is that a shutdown occurs over budget disputes, but then Congress passes temporary funding, and then the government shuts down again later as the dispute is still not resolved.

THINGS ARE COMPLEX: Some programs funded by mandatory spending require incremental funding, and some programs funded by discretionary spending are funded by multi-year funding bills. So it is a little more complex than eluded above in practice.

FACT: Shutdowns have been relatively common in US history (one every 5 years or so). With that said, the late 2018-early 2019 shutdown has been the longest in history.

FACT: An estimated 380,000 employees have been furloughed during the late 2018-early 2019 shutdown. That means 380,000 employees can’t work and won’t get back pay (UPDATE: Congress passed a bill to give back pay to furloughed workers; it is expected to be signed). Another 420,000 employees will report to work during the current shutdown but not receive pay until the shutdown ends.

NOTE: The bill Congress passed to give back pay to furloughed workers is a good example of how Congress can step in to provide fixes while the government is shut down.

What Does the Process of Creating and Passing a Budget Look Like?

Although the budget process is a cycle, one can say the first step is that agencies submit budget requests to the President toward the end of each year.

Then the President offers up a wish list budget to Congress at the start of the year.

Then the house draws up a budget as legislation.

Then the budget must be approved by both the house and the senate (ideally by the fall).

Finally, the President has to sign off on it.

If any of those steps fails before the end of the current federal budget cycle (by Oct 1st), then a shutdown occurs.

With that said, Congress can stave off a shutdown by passing a temporary funding bill.

What are the Effects of a Shutdown?

When spending runs out and a government shutdown occurs, programs like Social Security, Medicare, and Medicaid, which are funded by mandatory spending, keep running, but a range of other programs and their workers run out of funding (and either need to run on reduced budgets or halt progress all together).

A shutdown means that agencies and workers funded by discretionary spending don’t get the funding they need, non-essential federal employees get furloughed (meaning not only do they not get checks, they also can’t preform any work related duties), essential employees have to work without pay, eventually non-essential social services can stop (so people who depend on assistance may stop getting assistance; it differs per program), and generally things slow down until funding comes back.

In a partial shutdown more non-essential services and employees are retained, in a full shutdown only essential services are retained while federal workers work without pay.

What Happens When The Government Re-Opens?

Once a budget is passed and the President signs it the government is re-opened.

Once the government reopens federal workers who worked during the shutdown get their back pay and federal programs get funded.

Further, those who stopped getting assistance can get it again.

Does Shutting Down the Government Save Money?

Despite what you may think, shutting down the government is actually costly and disruptive.

For more reading on the economics of why a shutdown can be costly, see this article by the Washington Post: A government shutdown would cost the U.S. economy $6.5 billion a week, S&P says.

Article Citations
  2. Government shutdowns in the United States. Wikipedia.org.
  3. Q&A: Everything You Should Know About Government Shutdowns. CRFB.org.
  4. 14 Steps to the Federal Budget Process Timeline. CQ.com.
  5. 15 Things You Should Know about the 2018 Partial Government Shutdown. Fee.org.
  6. Expenditures in the United States federal budget. Wikipedia.org.

Author: Thomas DeMichele

Thomas DeMichele is the content creator behind ObamaCareFacts.com, FactMyth.com, CryptocurrencyFacts.com, and other DogMediaSolutions.com and Massive Dog properties. He also contributes to MakerDAO and other cryptocurrency-based projects. Tom's focus in all...

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