The United States faces the possibility of a government shutdown on October 1, 2023, as Congress struggles to pass the necessary appropriations bills to fund government operations for the new fiscal year.
The Antideficiency Act and Government Shutdowns
A government shutdown occurs when Congress fails to pass the 12 annual appropriation bills, as mandated by the Antideficiency Act. Under this law, federal agencies are prohibited from spending money without congressional approval. Consequently, if Congress does not enact these bills, non-essential government functions must cease, leading to a government shutdown. In cases where only some of the appropriation bills are passed, a partial shutdown may occur, affecting specific agencies without appropriations.
Impacts of Government Shutdowns
During government shutdowns, many federal employees are instructed not to report to work. However, legislation passed in 2019 guarantees that these employees will receive back pay once the shutdown concludes. Essential services, such as air traffic control and law enforcement, continue to operate, albeit without immediate compensation.
Notably, benefits like Social Security and Medicare remain unaffected because they are authorized by laws that do not require annual approval. Nevertheless, some services, such as those offered by Social Security benefit offices, may experience limitations during a shutdown. Additionally, the Treasury can continue to pay interest on U.S. Treasury debt as scheduled.
Shutdowns can lead to disruptions in various government functions, including delays in processing passport applications, small business loans, or government benefits. National parks may experience closures, and food-safety inspections may decrease, impacting public safety. To prepare for these events, the White House Office of Management & Budget maintains detailed contingency plans for government agencies.
Fiscal Responsibility Act and House Republican Opposition
The risk of a government shutdown in the fall of 2023 stems from disagreements between House Republicans and the White House over appropriations levels set in the Fiscal Responsibility Act. While the Senate Appropriations Committee has passed all 12 appropriations bills with bipartisan support, House Republicans seek reduced spending levels, causing friction. The House bills also include contentious provisions on various topics.
As the Senate and House have passed different bills, the next step should be a conference committee to forge a compromise. However, this process may prove contentious and time-consuming, as the fiscal year end approaches.
Continuing Resolutions as a Temporary Measure
To avoid a shutdown, Congress may resort to passing a continuing resolution (CR), a temporary spending bill that funds government operations until a specified date. CRs often maintain prior-year funding levels. Still, they can be challenging for government agencies to manage as they must prepare for a possible shutdown while planning for ongoing operations.
The Fiscal Responsibility Act introduces a unique feature to discourage extended CR usage beyond December 2023. If a CR is in effect on January 1, 2024, spending limits will be automatically revised, particularly impacting defense spending.
The Impact of Government Shutdowns on the Economy
Government shutdowns are relatively uncommon, with only four shutdowns resulting in operations being affected for more than a day. The longest shutdown occurred in 1995-1996 and lasted 26 days. Prolonged shutdowns can have a modest but temporary impact on the economy, with estimates indicating a reduction in GDP growth during the shutdown period.
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