US House Minority Leader Hakeem Jeffries, accompanied by Democratic “VIP” Kathryn Clark (D-Massachusetts) and Congressman Pete Aguilar (D-Calif.), descends the House steps on the eve of the shutdown. Photo: Getty Images
The US government has shut down after Congress failed to pass a temporary budget. At stake are hundreds of thousands of jobs, billions of dollars in economic losses and a political war between Republicans and Democrats who are unwilling to compromise on healthcare subsidies. What will be the consequences of this confrontation? Highlights from Bloomberg, Reuters, WSJ and FT
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The US federal government has shut down after Congress failed to pass a temporary budget. At midnight on October 1, Washington time, the White House Budget Office ordered federal agencies to put their shutdown plans into action.
A shutdown is an administrative pause of all non-critical functions. During a shutdown, employees in critical areas (the military, security, airport control) continue to work, but some employees in other departments are put on forced leave until funding is restored.
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This is the first shutdown in the US in almost seven years and the third during the presidency of Donald Trump, writes Bloomberg. The reason for the political impasse is a dispute between the two parties over health subsidies. Republicans proposed a “clean” resolution that would extend government funding until November 21, but without additional spending. Democrats insisted on including in the document an extension of health insurance subsidies, which were supposed to end at the end of the year.
As a result, the Senate failed to find the necessary 60 votes: all but three Democrats voted against the Republican plan. This finally opened the way for a government shutdown, the Financial Times writes.
At stake is $1.7 trillion for the work of federal agencies, about a quarter of the $7 trillion US budget, Reuters comments. The rest goes to health care and pension programs, as well as servicing the US national debt, which has reached $37.5 trillion.
An announcement about the government shutdown loan program is displayed outside the Senate Federal Credit Union branch in the Hart Senate Building on September 30, 2025 in Washington. Photo by Getty Images
The confrontation between Democrats and Republicans
US President Donald Trump blamed the shutdown on Democrats and publicly threatened that during the shutdown, his administration could resort not only to temporary furloughs but also to mass layoffs of civil servants.
Democratic leaders responded by saying they would not be intimidated and that the White House would be held accountable for the crisis. The Republican bill was “nonpartisan” and called on Democrats to join the vote, Senate Majority Leader John Thune told Bloomberg. Negotiations are only possible on a bipartisan basis and with both sides’ positions in mind, Democratic leader Chuck Schumer told Reuters.
During the budget standoff, Trump also shared a deepfake video of Democratic leader Chuck Schumer wearing a sombrero. One version shows House Minority Leader Hakeem Jeffries with a mustache next to him. Democrats called the video racist and an attempt to disparage his opponents, while Schumer described it as “childish and petty” and showed the White House’s lack of seriousness in handling the shutdown.
To reopen the government, Congress must pass a new resolution on funding the federal government, either short-term or annual. Republicans expect several Democrats to join them in voting for their plan in the coming days, the FT writes. Democrats, for their part, have signaled a willingness to compromise only if the budget includes an extension of health subsidies.
32% of voters blame Trump for the shutdown, 27% blame Republicans in Congress, according to a Data for Progress poll this month. Just over a third blame Democrats, the FT reports.
The US Senate lacked the 60 votes needed to vote on funding and prevent a shutdown. Photo: Getty Images
The impact of the shutdown on the economy
The financial impact of the shutdown in the US starts with the labor market. Due to the suspension of government funding, hundreds of thousands of civil servants have been furloughed. If the pause lasts three weeks, unemployment in the US will temporarily jump to 4.6-4.7% against 4.3% in August 2025, writes Bloomberg. An additional risk is political statements about possible mass layoffs of more than 750,000 workers, which will delay the recovery of the economy after the shutdown.
In the previous record-breaking government shutdown of 2018–2019, the US economy never recovered $3 billion of the $11 billion in lost GDP, the Congressional Budget Office estimated.
The publication of key economic reports, including Friday's labor market release, has been postponed, leaving the Fed and investors without the usual statistics to make decisions, Bloomberg adds. Wall Street futures sank, gold hit a record high, Asian shares faltered as investors worried about data delays and job losses, Reuters writes. The dollar fell to a one-week low against major currencies.
The private sector will be hampered by operational disruptions. The halt in the collection of some statistics, delays in regulatory approvals and loans for small businesses, problems with infrastructure projects and tourism are all putting pressure on US GDP, writes the WSJ. The 34-day shutdown in 2018-2019 cut the annual growth rate by about 0.4%, and the 16-day one in 2013 cost the US economy up to 0.6% of the growth rate. At that time, the private sector lost about 120,000 jobs due to disruptions in inspections and permits, adds the WSJ.
What will (not) work
The federal government has switched to “essentials only” mode: the post office, federal courts, state railroads, TSA air security services and air traffic controllers, as well as passport offices and FHA mortgage programs are operating, Bloomberg writes.
TSA employees and controllers will work without pay, which has caused problems in the past. In 2019, many employees did not show up for their shifts and checkpoints were closed, the WSJ adds.
National parks are open to visitors, but some services operate with restrictions. Most museums are mostly closed. Passport and visa services remain available, but delays in processing documents may occur.
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