Government Shutdown Possible Just Before the Holidays

What Happened?

Late Wednesday evening Speaker of the House Mike Johnson pulled a federal spending bill. It would have funded the U.S. government through March 14, 2025.

Without a continuing resolution to provide funding for the government to pay its bills, a shutdown could begin on 12:01a.m. on December 21^st.

The move comes after criticism from President-Elect Donald Trump and from Elon Musk, who had criticized the previous spending bill on X. Items that drew the most criticism were pay raises for members of Congress and one hundred billion dollars in disaster aid.

Why it Matters

As of December 19, 2024, no new spending plan had been put forward by either Democrats or Republicans in Congress. If the federal government were to shut down, many government workers would be furloughed

Although those providing essential services such as law enforcement, military, and air traffic control would continue to work. Social Security and Medicare would continue to operate even if there is a government shut down because neither of those programs are governed by statutes requiring annual approval.

If there is a shutdown, affected federal workers would not get paid until Congress approved a new spending bill. After the shutdown ends, workers would receive retroactive paychecks covering the days they were furloughed or had to work without pay, according to the Office of Personnel Management.

The last federal government shutdown began in December 2018 and lasted until January 2019. In the last 40 years, there have been 14 government shutdowns, including six since 1990.

The current continuing resolution funding the U.S. government through December 20th was put together by former Speaker of the House Mike McCarthy, and the spending deal he helped pass ultimately cost him his speakership.

How it Affects You

Holiday travel could be impacted by a federal government shutdown. According to the Department of Homeland Security, ‘significant delays and longer wait times for travelers at airports across the country are possible, based on what occurred during previous shutdowns.’

Active-duty military members would continue to work but could not be paid until Congress passed a new spending bill.

There could be economic consequences for a shutdown as well. According to Goldman Sachs ‘A government-wide shutdown would directly reduce growth by around 0.15 percentage point for each week it lasted, or about 0.2 percentage point per week once private sector effects were included.’

With lame duck President Biden wielding diminished influence and President-Elect Trump yet to take office, it’s difficult to predict how long a shutdown would last. Wall Street heavyweight Goldman Sachs indicated they believe a shutdown has become more likely since Wednesday, but a prolonged shutdown is not.