US government is headed towards a shutdown: Here's all you need to know

Members of the Democratic party want a short extension of funding so they can also push for healthcare tax breaks that keep insurance costs lower for 24 million US citizens

The United States (US) government is on the brink of a shutdown after talks between President Donald Trump and his Democratic opponents at the White House failed to reach a breakthrough. US Vice President JD Vance said he believes the government is headed towards a shutdown, which will likely disrupt several services starting October 1.

 

Following a recent meeting, both sides blamed each other for the stalemate, insisting the other would be responsible if Congress fails to extend government funding beyond the Tuesday midnight (local time) deadline.

 

Here’s what a shutdown means, how it could impact Donald Trump’s administration, and which services are likely to be affected.

 

What’s happening?

The US government is close to a shutdown because Republicans and Democrats cannot agree on how to fund government operations. The fight centres on $1.7 trillion in “discretionary” spending, which funds federal agencies. Most of the remainder of the $7 trillion budget is allocated to health, pensions, and interest on America’s substantial $37.5 trillion debt.

 

Democrats want only a short extension of funding so they can also push for healthcare tax breaks that keep insurance costs lower for 24 million US citizens. Republicans prefer a longer extension until November, but want to debate healthcare separately.

 

In a recent interview with Fox News, Vance said, “We don’t want to shut down the government, but it's really up to the Democrats.”

 

Sharing a snippet of the interview on X, Vance wrote: “The contrast could not be more clear: Republicans are trying to keep the government open and put the interest of Americans first. Meanwhile, Democrats want to take from the American people in order to give taxpayer-funded healthcare to illegal immigrants.”

Why is it important?

With neither side backing down, the government could run out of money after Tuesday midnight, forcing agencies to shut down services until a deal is reached. This will affect multiple services and disrupt several functions, such as the release of economic data. 

 

If Congress does not extend temporary tax breaks, at least 24 million US citizens who get coverage through the Affordable Care Act will see their costs rise.

What would shut down?

Many non-essential federal employees could be furloughed (sent home without pay) until funding is restored. Routine administrative functions across agencies may be suspended or scaled back.

 

Some economic data releases, such as the September employment report, might be delayed or suspended. The judiciary warns it may not be able to fully sustain operations beyond October 3 without funding.

What will continue?

• Essential functions such as national security, public safety, and law enforcement will continue.
• Programs funded by mandatory spending or with separate legal authority, including Social Security and Medicare, will go on.
• Some federal employees may work without pay temporarily, subject to later appropriation of funds.

Has there been a shutdown before?

There have been at least 14 partial shutdowns since 1981. However, most of them lasted just a few days, according to a Reuters report. The most recent and also the longest was during Trump’s first term in 2018–19. The shutdown lasted for 35 days over an immigration dispute. This time, healthcare has been in focus. 

Impact of US govt shutdown

The 2018–2019 shutdown cost the economy about $3 billion (0.02 per cent of gross domestic product), according to the Congressional Budget Office.

 

Around 800,000 of the federal government’s 2.2 million employees were furloughed. Some services continued: for example, 63 national parks stayed open, but public restrooms, information desks, and waste disposal were closed.