Update 898 – Govt Stuck in Shutdown:
Drill Down on Off-Ramps and Impact
At 12:01 a.m. this morning, the federal government was thrust into a shutdown, as Congress failed to pass short-term funding that would keep the government running past yesterday’s expiration of fiscal year 2025. Democrats and Republicans are split over proposals for a short-term solution, with Democrats demanding policy concessions on healthcare issues and Trump’s continued interference with Congress’s power of the purse. The GOP has largely refused to negotiate, giving little reason for Senate Democrats to cave and offer Republicans the seven votes needed to overcome the Senate’s 60-vote filibuster threshold and end the shutdown.
The costs of a government shutdown are extreme: hundreds of thousands of workers are facing furloughs or dismissal, others are being asked to work without pay, government programs and services are ceasing operation, and the macroeconomy is expected to take a significant hit. Public opinion casting blame on one party could put an end to the funding stalemate in the coming days or weeks, but for now, both sides have dug in their heels, with no clear bipartisan resolution in sight.
Best,
Dana
The 2026 fiscal year began today with the government in shutdown after Congress failed to extend funding for discretionary programs. The country is now bracing for the human and economic impact of a shutdown, which will lead to hundreds of thousands of government workers being furloughed or working without pay, and non-essential government programs ceasing operation.
Intensifying concern over the harm of a shutdown – which only increases over time – is the absence of an obvious off-ramp. Democrats have made a series of demands on healthcare fixes and the executive branch’s practice of withholding congressionally-appropriated funding, but Republicans have been largely unwilling to negotiate. With little prospect for a bipartisan legislative compromise, President Trump’s demonstrated willingness to allow a historically long shutdown and his administration’s intent to make this one as painful as possible for the American people, the impasse is far from a usual funding lapse.
CR Votes Fail in Senate; Nobody Home in House
The ongoing government shutdown follows a series of failed congressional votes on short-term Continuing Resolutions (CRs), which are used to fund the government in the case that Congress can’t pass some or all of the 12 funding bills that provide appropriations for discretionary programs. Congress has only passed all 12 appropriations bills four times since the current budget era began with the passage of the Congressional Budget Act in 1974, and given the political dynamics in Washington today, it was long expected to turn to a CR for FY26 funding.
Despite this expectation, Congress did not begin serious consideration of the CR until mere weeks before the deadline. Republicans proposed a seven-week extension of government funding, while Democrats offered a four-week CR with a larger scope that would address the Republican-created healthcare crisis and the administration’s interference with congressionally appropriated funds.
Failed CR Votes
The Republican CR cleared the House in a 217-212 vote on September 19, but quickly failed in the Senate 44-48. Democrats also pushed for consideration of their CR, which failed 47-45. Following this series of votes, both chambers recessed for the following week, and House Republicans announced they would stay on recess to jam the Senate with their proposal.
The Senate, which returned this week, reconsidered both proposals last night ahead of the shutdown deadline, with the Republican, House-passed CR failing again to meet the Senate’s 60-vote filibuster threshold in a 55-45 vote and the Democratic proposal failing 47-53. The Republican CR got support from Democratic Senators John Fetterman (D-PA) and Catherine Cortez Masto (D-NV), in addition to Independent Senator Angus King (I-ME) and all Senate Republicans except for Rand Paul (R-KY).
Today, Senate GOP leadership brought both bills up for a vote, which ended with the same tallies as yesterday. While there was no clear expectation that more Democrats would support the House-passed CR today, the lack of additional Democratic votes underscores the gridlock over government funding that is driving the shutdown. Senate GOP leadership will continue to bring both bills up for votes this week, with the hope that more Democrats will feel the pressure and join Republicans in supporting the House-passed CR.
Lack of Negotiations Move Dem. Opposition
Democrats have spent the majority of the past two weeks demanding serious negotiations in exchange for their votes – necessary to avoid a shutdown given the current 53-vote GOP majority. In response to these demands, Trump scheduled and then quickly canceled a meeting with Democrats last week, directing rank-and-file Republicans not to negotiate with Democrats. Trump went back on this decision and held a meeting with the four corners of congressional leadership on Monday, but the meeting did little more than solidify divisions between both parties. Republicans refused to compromise on any of the Democratic demands included in their CR, and Democrats made it clear that they will not give away their votes for free, setting the stage for yesterday’s failed CR votes and the current shutdown.
Prospects for Escaping Shutdown
Given the individual and macroeconomic harm inflicted by a shutdown, which we explore in greater detail below, many are now left wondering how long the funding lapse will last and how Congress may be able to reach a resolution that brings the government back online. While a usual negotiation would end in some sort of bipartisan compromise, that does not seem to be the likely outcome in this scenario.
Republicans Ignore Democratic Demands
Democrats have presented their demands, including:
- Permanent extension of enhanced ACA Premium Tax Credits (PTCs) scheduled to expire at the end of this year, leading to an over 75 percent increase in marketplace healthcare premiums and around 4 million people losing healthcare coverage.
- Repeal of the health title of the OBBB, which included over $1 trillion in cuts to Medicaid.
- Restoration of funding that was illegally withheld/impounded by the Trump administration during FY25.
- Elimination of the simple majority vote threshold for rescission packages and protections against rescissions right before the end of a fiscal year (pocket rescissions).
While this is an ambitious slate of concessions, especially considering the lack of unified Republican support for extending enhanced PTCs, the fact that the OBBB’s healthcare cuts passed with GOP support less than three months ago, and congressional Republicans’ unwillingness to challenge the Trump administration’s overreach, Democrats have expressed that they are willing to negotiate and find common ground.
PTCs have come up most frequently as a point of compromise that could bring Democrats to the table on a CR that would stave off a government shutdown. After initially dismissing the prospect of action on this front, Senate Majority Leader John Thune (R-SD) said last week that Republicans and Trump would be willing to negotiate outside of the context of a government shutdown.
But insurers have already set their rates for next year under the assumption that the enhancements will expire, and people will begin marketplace enrollment as soon as November 1. This means Democrats want to see action sooner than the credits’ expiration at the end of the year to prevent prices from skyrocketing for millions of Americans. This government funding battle may be the only chance to do so.
It is also understandable that Democrats would not take Republican “promises” to negotiate on healthcare seriously. Republicans have had most of the leverage this year, given their trifecta, and they have used that opportunity to decimate healthcare spending through their partisan reconciliation bill (OBBB). In this bill, Republicans also refused to extend enhanced PTCs, a decision they attributed to the over $300 billion price tag despite the bill’s projected overall impact on the deficit of over $4 trillion/10 years – much of which will flow to the ultra-wealthy in the form of tax cuts. From these actions, it is clear that the Republicans are unlikely to address healthcare under “normal” circumstances, and Democrats are correct in recognizing that leverage, like their votes that are needed to end a government shutdown, is the only avenue available to save Americans from the current healthcare crisis.
Perhaps a bigger issue that will underlie shutdown negotiations is the Trump administration’s treatment of congressionally appropriated funding. The administration has unconstitutionally withheld hundreds of billions of dollars that Congress directed it to spend in bipartisan spending bills, or turned to the partisan rescissions process to renege on these deals without Democratic support. Again, this leaves little reason for Democrats to give away their votes for free if the administration and Republicans can simply choose not to follow these deals and effectively set their own budgets.
Due to the dynamics outlined above, and the fact that House Republicans are refusing to bring the chamber back into session, there is no clear off-ramp for a government shutdown in the near term. There is little common ground that could give way to a bipartisan agreement, and both parties feel that they are positioned to “win” a shutdown in the eyes of the American public. The length of the shutdown may very well depend on which side feels the most pressure to cave on their demands, as opposed to bipartisan negotiations.
Approps. Impasse and Future Shutdowns
Even if one side does cave on its demands due to the resulting harm of the shutdown and public opinion, there is still a possibility that we could see another funding lapse this fiscal year. The House and Senate are still far apart on full-year funding bills, with the Senate pursuing bipartisan proposals and the House focusing on partisan bills that are more representative of the President’s FY26 budget proposal, which called for a whopping 23 percent cut in non-defense discretionary (NDD) spending. A short-term CR could put an end to a shutdown, but it would not bring Congress any closer to finishing full-year funding for FY26. Thus, it would not eliminate the possibility of another government shutdown upon the expiration of any shutdown-ending CR.
Human and Economic Cost of a Shutdown
The Federal Workforce
With the current shutdown still in its infancy, it’s important to explore the potential impact of the government shutdown as it drags on. First and foremost, a shutdown means that hundreds of thousands of federal civil servants will be furloughed or, as the Trump administration has repeatedly threatened, fired. According to the CBO, about 750,000 workers could be furloughed each day during this shutdown, with the total daily cost of their compensation standing at roughly $400 million. Many of the 4 million federal workers will have to continue to work without pay, such as air traffic controllers, since their work is considered too important to allow them to stop. While all of these workers will receive back pay when the government reopens, federal contractors will not be so lucky, as they have no such guarantees.
If furloughs were not bad enough, OMB Director Russ Vought has threatened to enact massive Reductions in Force (RIFs) during the shutdown. Trump himself has stated, “We’ll be laying off a lot of people…They’re going to be Democrats.” While the administration will theoretically run into the same legal challenges in enacting mass layoffs during a shutdown as it would during normal times, it has shown eagerness to barrel ahead and plans to use the automatic furloughs to tell perhaps hundreds of thousands of federal employees they have been dismissed. Vought plans to keep enough staff at the targeted agencies to carry out his layoffs, though laid-off employees would get 60 days’ notice.
Which agencies will these RIFs target and to what degree? It is still to be determined, but they would inevitably devastate federal workers, their families, and their communities. The greater Washington, DC area, in particular, has already been hit hard by the Trump administration, and more RIFs will mean that its unemployment rate, which is currently increasing eight times as quickly as that of the rest of the country, will skyrocket. The American Federation of State, County, and Municipal Employees and the American Federation of Government Employees have filed a joint lawsuit challenging the Trump administration’s authority to initiate RIFs during the shutdown, so it is possible that Vought won’t be able to follow through with his firing plans until after the shutdown has concluded.
The Overall Economy
The shutdown will also lead to ripple effects throughout the economy beyond its impact on federal civil servants. Tourism in DC and across the country will take a hit, as the Smithsonian and national parks are either forced to close or limit their operations. Additionally, while air-traffic controllers and TSA employees would theoretically work without pay, in past shutdowns, many of them chose to call in absent from work to avoid doing so, limiting airport capacity and causing significant delays. Private businesses that rely heavily on the federal government, such as defense contractors, will be forced to furlough their own workers, constraining private sector job growth in the process. Additionally, the Bureau of Labor Statistics will be one of the government agencies to close down, meaning that the September jobs report slated to come this Friday will be delayed.
In short, the economic pain caused by this government shutdown could be considerable, especially if it lasts longer than a few weeks. In a letter to Congress and the administration imploring them to avoid shutting down the government, the US Chamber of Commerce stated that the partial shutdown in December 2018 cost the economy $11 billion in the following two quarters, $3 billion of which was never reclaimed. Not only is that just an estimate for a partial shutdown, but the Trump administration’s promise to make the shutdown as painful as possible means that the full economic fallout this time around could be far greater.
Trumper Tantrum to Carry Costs
As much of the federal government grinds to a halt, it is clear that congressional Republicans’ and Trump’s refusals to come to the negotiating table have thrown the country into an avoidable crisis. While Democrats have demanded bipartisan talks addressing their comprehensive “first-offer” CR, Republicans have insisted on a “my way or the highway” mentality by refusing to even negotiate. Whether the GOP likes it or not, funding bills need 60 votes in the Senate, and their majority is not large enough to get there alone.
Republicans’ failure to entertain bipartisan consensus on appropriations comes at a significant cost to government workers, everyday Americans, and the broader economy. This cost, as opposed to a bipartisan agreement, may be the factor that determines the length of this shutdown as opposed to any sort of bipartisan agreement. But for now, we remain in gridlock, with no end of the shutdown in sight.