Why in news?

The US government entered a shutdown on October 1, 2025, at 12:01 AM—the first in seven years—after Republicans and Democrats failed to agree on federal funding. The impasse has forced thousands of federal employees into furlough and disrupted essential public services.

Economic consequences include delayed release of key US data, adding uncertainty to markets. Since 1980, the US has witnessed 14 shutdowns, three of which occurred during Trump’s first term.

What’s in Today’s Article?

• What Triggers a US Government Shutdown?
• Reasons Behind the US Government Shut Down
• Impact of the US Government Shutdown
• Why This Shutdown Could Be Different?

What Triggers a US Government Shutdown?

• A US government shutdown occurs when Congress fails to pass annual appropriations bills—about a dozen in total—that allocate funds for federal agencies, and the President does not give assent before the October 1 deadline.
• These bills are often bundled into an “omnibus” package to hasten approval.
• If funding lapses, government operations are forced to either fully or partially shut down, depending on which agencies remain unfunded.

Reasons Behind the US Government Shut Down

• The current US government shutdown stems from a deadlock between Republicans and Democrats over federal funding.
• Democrats demanded an extension of expiring healthcare subsidies and the reversal of Medicaid cuts introduced under Trump’s “Big, Beautiful Bill” — a sweeping tax and spending package passed earlier this year.
• The law boosted defence spending and tax breaks for the wealthy by cutting federal programs, including Medicaid, while funding departments like Defence and Homeland Security, which continue to operate despite the shutdown.
• Republicans pushed for a “clean” continuing resolution to extend funding at current levels until November 21, but Democrats countered with a proposal that tied funding to healthcare provisions and limits on Trump’s fiscal powers.
• The standoff over these conditions caused Congress to miss the October 1 deadline, triggering the shutdown.

Impact of the US Government Shutdown

• A shutdown halts all non-essential federal government functions under the Antideficiency Act, while essential services for safety and property protection continue. This affects employees, citizens, and the broader economy.
• For federal employees, around 750,000 are expected to be furloughed, losing $400 million per day in back pay, similar to the 2018–19 shutdown that sent 800,000 home.
• Essential workers, including military personnel, law enforcement, and constitutional officers, will continue working.
• For the public, core benefits like Medicare, Medicaid, and Social Security remain operational since they are permanently funded.
• However, new enrolments may face delays, travel and transport disruptions could occur if airport staff protest unpaid salaries, and public landmarks may shut down.
• For the economy, the extent of damage depends on the shutdown’s duration. The 2018–19 shutdown cost $11 billion in lost output, with $3 billion never recovered.
• The current closure could delay critical data releases such as the September jobs report, complicating Federal Reserve decisions on interest rates and forcing reliance on regional data instead.

Why This Shutdown Could Be Different?

• Unlike previous shutdowns, the current one may have lasting consequences due to the role of Trump’s Department of Government Efficiency, a quasi-government body aimed at shrinking federal operations.
• Instead of treating the shutdown as a temporary pause, the department has encouraged federal agencies to view it as an opportunity for permanent workforce reduction.
• In a memo, the Office of Management and Budget advised agencies to plan for “reduction in force” rather than simply furloughs.
• This means that programs without mandatory appropriations could face permanent staff cuts, intensifying the impact of the shutdown.