The U.S. Government Has Shut Down — What Now?

The U.S. government has shut down, after Congress failed to pass funding legislation before a midnight deadline on Tuesday.

The Senate on Tuesday voted on two separate bills to keep the government funded, one already passed by the House and backed by Republicans, and an alternative resolution proposed by Democrats. Both failed to meet the 60-vote bar needed for passage.

What happens now? For starters, nonessential services have shut down, putting many thousands of federal workers on furlough while all other essential staff continue to report without pay. It also means delays for certain benefit program features, financial aid and IRS verification, as well as potential travel disruptions.

Federal workers will bear the brunt of the shutdown’s impact. And there could be more bad news for federal workers on the way. Last week, the Office of Management and Budget issued a memo directing agencies to consider mass firings during a shutdown. Furloughs are standard during shutdowns, but it’s unclear if a funding lapse can legally justify permanent layoffs.

During the shutdown, there will be ripple effects on delivery of government services and programs.

What’s affected immediately:

• National parks may close or operate without services. 

• Federal student aid application processing could be delayed. The shutdown coincides with the opening of the Free Application for Federal Student Aid (FAFSA). 

• Food and drug inspections will be delayed. 

• The IRS can’t verify income and Social Security numbers, which could cause delays for some mortgages and other loan approvals, as well as tax refunds. 

What will keep running, to a point:

• Flights will still operate, but there could be delays if TSA agents and air traffic controllers, who are considered essential employees, decide to call out of work, leading to staff shortages. Even small shortages can have a big impact: During a 2019 government shutdown, the absence of just 10 air traffic controllers at two airports grounded flights and caused delays for the Eastern Seaboard. 

• Social Security and Medicare will keep going, but some administrative functions may be suspended, and telehealth appointments may be interrupted.  

• Unemployment benefits will continue — states administer compensation — but there could be application processing delays if the shutdown lasts long enough. 

• Food benefits through Supplemental Nutrition Assistance Program (SNAP) and the accompanying WIC program will continue — both run on contingency funds. WIC funding will only last one month, and SNAP could be strained after 30 days, as well. 

What won’t be affected:

• The postal service — the USPS is not funded by the federal government. 

• Federal student loan payments — accounts are serviced by private companies. 

• Public schools will remain open — they’re funded by state and local governments. 

• Amtrak will continue operations — it is operated by a for-profit company.

The shutdown could have trickle-down economic effects, depending on how long it continues. But one immediate and direct impact will be a suspension of federal economic data. That data won’t be released during the shutdown, including the monthly jobs report slated for Friday, and the Bureau of Labor Statistics would also halt data collection. That’s a problem because the government’s official data releases guide the markets, the Federal Reserve and business decisions.

Every year, Congress is supposed to pass 12 spending bills to keep the government’s lights on. These appropriations bills fund those programs already approved by Congress, including defense, the IRS, food assistance, veterans’ benefits and national parks.

The deadline to fund programs for the next fiscal year — in this case 2025-2026 — is always Oct. 1. Without passing appropriations bills or approving a stopgap that kicks the deadline down the road, the government shuts down.

Why didn’t Congress pass the funding bills? The two parties are deadlocked over Democrats’ demands to permanently extend expiring Obamacare subsidies and roll back recent Medicaid cuts in the “one, big beautiful bill.”

The Senate on Tuesday rejected two funding bills: one from Democrats that included the above stipulations and another “clean” stopgap already approved by House Republicans. In the past few funding cycles, Congress has relied on multiple short-term continuing resolutions to keep the government temporarily running.

On Monday, congressional leaders from both parties met with President Donald Trump to negotiate, but failed to make any progress on the impasse.

It’s unclear how long this shutdown will last. There have been 21 shutdowns since 1976 and most are short-lived — a few hours or days, at the most.

There hasn’t been a shutdown since the 2018-2019 shutdown — the longest in history — which lasted 35 days. The reason for that shutdown was a dispute over funding for Trump’s border wall in his first term.

Before that there was a 16-day shutdown in 2013 as negotiations over the Affordable Care Act dragged on. In 1995 and 1996, two shutdowns totaled 26 days.

For more on the effects of a government shutdown, listen to our Smart Money podcast episode from last week.