In the U.S., a government shutdown happens when nonessential government offices can no longer remain open due to a lack of funding.

The lack of funding usually occurs when there is a delay in the approval of the federal budget for the upcoming fiscal year.

The shutdown remains in effect until parties can reach a compromise and a budget bill passes.

During a government shutdown, many federally run operations will halt. Some may stay open by running on cash reserves but once these run out, they will also close. Any office that does not receive funding from Congress would continue to operate during the shutdown.

  • Most government agencies will close during a shutdown.
  • Some essential workers must continue to work but may not receive pay.
  • Veterans' benefits and unemployed payments will continue unaffected.
  • Furloughed* federal workers may apply for unemployment.
  • Long government shutdowns will affect the entire American economy.

How does a government shutdown affect the economy?
As government operations slow or stop altogether, the effects of a shutdown may spread to impact businesses in the private sector.

Furloughed*, or unpaid workers, often reduce their spending which impacts local businesses.

At midnight on December 21, 2018, the United States went into a government shutdown. The president and members of Congress were unable to agree on 2019 fiscal year funding. According to articles in Forbes, the government shutdown is affecting approximately 800,000 federal employees. More than 420,000 federal employees were expected to work without pay and more than 280,000 federal employees would be placed on furlough*.

*A furlough is a temporary layoff, involuntary leave or other modification of normal working hours without pay for a specified period.

Source: Investopedia, January 2019.

The information in this article has been taken from several reliable sources but does not necessarily reflect the views of UBT.  No short article can cover a topic completely; it is not intended that you should rely on this information for business decisions.