As Democrats and Republicans battle over the federal budget for the new fiscal year, the United States is on the verge of another federal government shutdown.
Government shutdown could hurt America’s top credit rating, as it would underscore the weakness of U.S. institutional and governance strength relative to other AAA-rated sovereigns, Moody’s Investors Service warned Monday.
What is a federal government shutdown? What are the impacts? Why do government shutdowns often happen in the United States?
WHAT IS IT?
The fiscal year of 2023 is set to end on Sept. 30, and the budget Congress has approved for 2023 can only support the federal government operation until that day. If the two parties cannot reach an agreement on the new fiscal year budget in time, or at least pass a short-term funding bill, then from Oct. 1, part of the federal government will be closed.
In a federal government shutdown, all non-essential operations are usually suspended. All but the government’s most essential workers will be furloughed, which could impact as many as 800,000 federal workers nationwide.
Essential departments such as the military, border defense, and public security are not affected. Post offices will remain open, and police and firefighters are on duty as usual.
Airport security screeners — from the Transportation Security Administration — and air traffic control workers are required to work, but absenteeism could be a problem.
U.S. Transportation Secretary Pete Buttigieg said the shortage of air traffic controllers could worsen during a government shutdown. The White House said travelers will expect significant delays and longer waiting at airports across the country.
The U.S. Environmental Protection Agency would halt most inspections of hazardous waste sites, drinking water, and chemical facilities, which could put drinking water safety at risk. The Food and Drug Administration may also be forced to delay food safety inspections.
Some national parks may remain open, but visitor facilities such as restrooms and visitor centers will be closed, according to the National Park Service. The U.S. Travel Industry Association estimates that the tourism industry could lose about 140 million dollars per day in case of a government shutdown.
Although a short-term shutdown would have limited impacts on the economy, the effects could become more significant if the stalemate persists. Furloughed federal workers could reduce spending during the shutdown, dragging down consumption growth, while the government would also temporarily cut back on purchases of goods and services.
According to the Congressional Budget Office, the last shutdown shaved 0.1 percent off economic output in the fourth quarter of 2018 and 0.2 percent in the first quarter of 2019.
WHY DOES IT HAPPEN?
It is not uncommon for the U.S. federal government to halt its operations due to intense political fights between the two parties, especially as partisan hostility has grown in recent years.
The most recent and longest government shutdown occurred from late 2018 to early 2019, when Democrats opposed funding for the U.S.-Mexico border wall proposed by then-President Donald Trump, and the two parties were stuck in a stalemate over immigration issues, leading to a five-week shutdown.
In 2013, during the Obama administration, some conservative Republican lawmakers blocked the implementation of Obamacare, leading to a 16-day government shutdown.
With worsening political polarization, members of the opposing party in Congress have pulled out all the stops and fought fiercely with the party holding the presidency on major issues.
Currently, President Joe Biden’s Democratic Party holds a narrow majority in the Senate, while Republicans won control of the House of Representatives in the midterm elections last year, making it difficult for Biden to advance his legislative agenda.
The two parties are engaged in a new round of battles over the appropriations for the new fiscal year, and they remain far apart. The plan introduced by House Republicans would cut federal agency spending by 8 percent and tighten immigration restrictions.
However, the bill has faced opposition within the Republican party and is unlikely to win support from Democrats.
Senate Majority Leader Chuck Schumer is stepping up pressure on House Republicans to pass a stopgap funding bill to avert a government shutdown, but it remains uncertain whether House Speaker Kevin McCarthy will secure enough votes to pass a bill.
“McCarthy has made the decision to shut the government down. Period. Stop,” said Democratic Senator Chris Murphy. McCarthy, frustrated with conservative rebels, said some individuals just “want to burn the whole place down.”
