What is the shutdown?
The mechanism is simple. Each year, Congress must pass twelve appropriations bills to fund federal agencies and programs. The Antideficiency Act—a US law dating back to 1884—prohibits government agencies from spending a cent without congressional approval. In the absence of a budget for fiscal year 2026, which began on October 1, a large proportion of government must shut down. Non-essential civil servants are placed on forced leave ("furlough") without pay (they will be paid retroactively only when the problem is resolved). Only those deemed essential (air traffic control, homeland security agencies, law enforcement, etc.) will remain on duty—and still without pay during the crisis—sometimes providing just a minimum service. Meanwhile, mandatory benefits (pensions, Social Security, Medicare, debt interest) will continue to be paid, as they are governed by other laws in force.
However, in general, the paralysis extends far beyond the gates of government. Administrative procedures pile up: deserted authorities, delays in passports, visas and loans. Health and safety agencies—such as those responsible for agriculture and public health—are only partially operational. More symbolically, national parks and monuments are closing their doors. Nothing embodies the financial impasse quite like a sign reading "National Park Service—Closed because of the Federal Government Shutdown."
Economic costs and key incidents
Every day without a budget takes its toll. The Congressional Budget Office ( CBO) estimates that a prolonged shutdown will reduce US GDP growth by around 2%, with an irrecoverable loss of $7bn-$14bn if the deadlock drags on. For October alone, a Treasury official has estimated the impact at $15bn per week in lost economic output. In all, hundreds of billions could be lost if the situation continues.
This hemorrhage primarily reflects the forced leave of nearly 750,000 federal employees and uncertainty about future salaries. Nearly the same number of employees have been required to come to work anyway, in the hope that the situation will be resolved later. In all, over 1.4 million federal workers are affected, some of whom no longer receive any monthly income. On the ground, these workers are accumulating unpaid overtime to maintain vital services (road traffic control, national cemeteries, fraud prevention, etc.). Ultimately, if normal subsidies remain blocked, the government will nevertheless have to pay all arrears.
This sudden shutdown is weighing on all sectors. Travel and tourism are particularly affected. Federal authorities have decided to reduce daily flights by 10% at the 40 largest US airports. The FAA (Federal Aviation Administration) has asked airlines to cut several thousand domestic routes to compensate for the exhaustion of air traffic controllers working without pay. Many travelers were surprised to find their flights canceled or delayed at these hubs (JFK, Chicago, Dallas, etc.), while flight safety is becoming more fragile: according to the Secretary of Transportation, up to 20% to 40% of controllers at major airports are not showing up for work until they are paid. These cancellations are creating a global domino effect: over 3 million American passengers have already experienced disruptions since the shutdown began.
Smaller infrastructures are also suffering. Health inspections in factories and rural areas are slowing down, while government-guaranteed loans are being put on hold. However, one of the most acute consequences is affecting welfare recipients. The SNAP program—federal food stamps—normally feeds more than 40 million Americans each month. However, with no funds approved for November, the USDA has announced that no new subsidies will be paid after October 31. Several states have taken legal action to force the continuation of payments. In this context, charities and local food banks are working hard to avoid the worst. In all, tens of millions of people—mostly children and the elderly—are at risk of being left without immediate food assistance.
Far from having no impact on the global economy, this national stalemate is also playing a role on the international stage. On the one hand, financial markets have remained calm - for the time being - with US and European stock indices even reaching record highs. Investors are betting on long-term economic resilience and the fact that, historically, shutdowns have only produced brief jolts. The average performance of the S&P 500 during these episodes is close to zero, and the 12 months that follow are often positive. 2025 is no exception so far: volatility remains contained and stocks have reacted mainly to the Fed and earnings, not to the budget deadlock itself.
BlueSky
On the other hand, uncertainty is mounting behind the scenes: the monthly publication of economic data (employment, inflation, GDP, etc.) has already been postponed. In the absence of official figures, neither the Fed nor foreign central banks can accurately assess the future needs of the world's largest economy. Furthermore, diplomatic and trade relations are on high alert: allies are scrutinizing the degree of political stability in Washington, and even Beijing is carefully monitoring US public accounts. Experts note that any slowdown in US consumption will ultimately affect partner countries' exports and commodity prices. In short, the fiscal shockwave is crossing the Atlantic and beyond, weighing on global confidence (even if governments remain cautious in their statements).
An unprecedented political imbroglio
The current impasse stems from a partisan standoff. On one side, Republicans control the White House, the House of Representatives, and the Senate (albeit with only 53 seats). Their initial strategy was to vote for a continuing resolution (a temporary funding bill) without any major concessions, leaving the Democrats out of the loop. On the other side, fresh from their victories in several local elections in early November, the Democrats declared that they would no longer support funding measures unless they included the extension of Obamacare (ACA) health insurance credits, which are set to expire at the end of 2025. These credits were introduced to lower healthcare costs for millions of Americans. Without them, premiums could jump by an average of 26% next year. This issue has become a political Achilles heel: the Democrats argue that low-income households must be protected, while Trump and his allies refuse to mix this issue with budget negotiations.
Since the start of the shutdown, Donald Trump has toughened his tone. He repeats that he will not be "blackmailed" and has refused to meet with Democratic leaders while the government is closed. In the Senate, Republican leaders have held several votes on stopgap bills, but none have garnered the support of at least eight Democrats needed to overcome the filibuster (a procedure to block or delay a vote in the Senate). Republican Speaker Mike Johnson has even left the House in recess since the end of September. Democrats, buoyed by their recent election victories, denounce a "hold-up" by Republicans who are controlling the situation. The result: despite a constitutional obligation to fund the government, each side remains entrenched in its position, turning the federal budget into a power struggle.
Comparison with historical shutdowns
This crisis is unprecedented in recent US history. Never before has a budget impasse lasted so long.
PBS
To put this into perspective, the previous longest shutdown lasted 35 days in 2018-2019. At the time, the sticking point was another thorny issue: Donald Trump was demanding $5.7bn to build a wall on the Mexican border, which Democrats in Congress refused to grant. Other notable budget shocks have been marked by major political disputes: in 1995-1996, a 22-day shutdown pitted Bill Clinton against Republicans over the issue of balancing the budget. In 2013, there was a 16-day shutdown over Obamacare under Barack Obama. In all these cases, the country emerged exhausted but with few lasting structural changes—except for a temporary loss of confidence. The current shutdown, however, is taking place in a climate of heightened rivalry and could leave a deeper scar on the economy and politics.
Conclusion: apparent calm, deep turmoil lurking beneath the surface
For now, America is weathering the storm. The shock absorbers are holding, the markets are looking elsewhere, and the economy continues to move forward, albeit with some difficulty. On a macro scale, the impact remains limited: a few hiccups, longer lines, black screens in the statistics, fewer flights, and delayed checks—nothing that, at present, is turning the tables.
But if the breakdown drags on, the mechanics become nonlinear. Delays turn into cancellations, arrears into social debts, and "adjustments" into dead losses. Vulnerable households first cut back on essentials, federal subcontractors cut jobs, states and local governments plug holes they did not dig, and macro visibility becomes blurred for the Fed and the world. And, even more insidiously, institutional rust sets in: fiscal credibility is undermined, confidence is damaged and risk premiums are reawakened.
Britanica
