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What is Meant by US Government Shutdown – US Shutdown of 2013 & Its Impacts

The United States Federal Government declared a nationwide shutdown on the 1st October, 2013, on account of failure to enact regular appropriations or a continuing resolution for the 2014 fiscal year.  Due to this as many as 800,000 federal employees were forced to take leave indefinitely without pay.  Approximately 1.3 million without immediate salary had to report to work.  Previously, in 1995-96 the US Government went in for shutdown.  Several questions arise in the mind of a layman.  The most basic questions have been explained below.

What was the Reason for US Government Shutdown?

Lack of agreement of compromise between two chambers of Congress led to the shutdown.  The Republican-led House of Representatives passed resolutions to defund the ‘Patient Protection and Affordable Care Act’ (popularly termed as “Obamacare”).  The Democratic-led Senate, however, had other opinions.  They felt that funding should continue with no additional conditions.  The House of Representatives passed the Continuing Appropriations Resolution of 2014 on September 20, 2013.  The Senate on removing the Affordable Care Act passed the revised bill on September 27, 2013.  The House of Representatives passed it back to the Senate after adding Affordable Care Act, which Senate refused to pass. The two sides could not compromise over this by midnight of September 30, 2013, causing The Federal Government to shut down.  The decision had to be taken immediately as October 1, 2013 is the first day of the 2014 federal fiscal year.  As scheduled many Affordable Care Act measures took effect on this day.  Lack of funds created this “funding gap”, leading to political crisis.

How does the US Government Spending Function?

The United States Constitution requires government spending to be approved in bills passed by the United States Congress.  While The Federal Reserve System is completely self-funded, others like Social Security and Medicare are partially self-funded.  As they are dependent on government funding, these are impacted when government fails to meet the financial obligations.  Funding gap arises on failure of Congress to pass budgetary approvals by the end of fiscal year and Antideficiency Act takes effect.  The act requires government functions to begin shutting down immediately so that the Constitutional authority of Congress is not breached by over spending.

Why was there the Need for Indefinite US Government Shutdown?

The US government has to close operations if the Congress does not agree on the funding bill.  There is no other alternative.  The US has experienced seventeen federal government shutdowns since 1976.  Out of this most were for a single day or for two days.  The shutdown in 1995–96 was the longest for 21 days.

 What is the Impact of the US Government Shutdown in the US?

During this period important governmental functions like national security and public safety (Law Enforcement, Military, Intelligence Agencies and Foreign Embassies) will operate, while all others close operations.  The impact of the shutdown is mostly felt by the employees of the federal government.  The federal workers are divided into two groups – essential and non-essential.  While the essential federal workers continue to work, the non-essential ones go home.  There are about 1.3 million essential civilian employees, who may or may not receive their pay checks.  Around 1.4 million active-service military members will receive their pay checks during the shutdown.

The overall economy has been affected adversely.  The economy is expected to lose about $200 million in economic activities for each day the government is closed.  The GDP growth is expected to reduce by 0.3 or 0.4 percentage points in the fourth quarter of 2013, during the two week shutdown.  Investors have pulled out their investments from the US stock markets; resulting in the Dow Jones Industrial Average falling below the 15,000 mark during the shutdown.

Many businesses like manufacturing which do direct business with the government are affected.  Closure of national parks, national museums and the inability of foreign tourists to get visas have impacted the tourism industry.  Due to the closure of tourism industry, US is losing money according to our market research.

The Food and Drug Administration will have to cease most of its food-safety operations during the shutdown.  Various nutritional, health and fitness programs are being disrupted.

 How does the Government End Shutdown?

In order to end the shutdown, the Congress needs to pass a bill (or bills) to fund the government, and the White House has to sign them.