According to Euronews, the current U.S. federal budget expired on September 30, 2025.The budget for fiscal year 2026 was to take effect from October 1, 2025 to September 30, 2026.Some government spending that is considered the most important, such as Social Security, air traffic, and the military, continues to be funded. Others, called discretionary, must be authorized by appropriations bills passed by Congress. They deal with many costs, from farm loans to financial regulators.
In the event of a shutdown, government employees employed to provide non-essential government services are furloughed. Employees in core government services continue to work, but without pay. Their salaries are paid retroactively. Work resumes as soon as Congress passes the necessary appropriations bills.
The problem of timely approval of the parameters of the next fiscal year in the United States arises with enviable periodicity. The last time the threat of a shutdown arose in 2023, but a compromise was found. This time the Senate did not have the necessary majority. To approve the resolution, the support of 7 Democratic senators was needed. And they promised it while preserving the tax credits associated with the Affordable Care Act, or Obamacare, which expire at the end of the year. Republicans argue that Democrats want to give illegal immigrants huge health care dollars.
The fallout from the suspension of discretionary spending, which accounts for 27% of all federal government spending, will cut government services. So will consumption, which is falling, affecting production in other sectors. Economists estimate that a month of downtime would reduce real quarterly GDP by 0.5% to 1.5%.
A shutdown would also mean a suspension of payments by the state administration to its suppliers. Interest rates on US government bonds may rise – investors will consider them more risky. Failure to reach an agreement on the debt ceiling will prevent the government from borrowing new net debt. And higher interest rates on government debt could lead to higher lending rates. As a result, stock prices may fall due to higher interest rates, lower activity and opaque statistics.
In the past, long shutdowns have been considered politically dangerous, but this time the Trump administration seems ready to shut down much of the state apparatus for a longer period of time, notes BBC news. Officials have threatened that they will use the shutdown to identify “not the most needed” workers.
In addition, after previous shutdowns, the government quickly returned to normal operations, with the number of employees and spending levels recovering.
The Trump administration has laid off many government employees in an effort to cut spending. The shutdown may allow it to accelerate mass layoffs in the state apparatus.
