What is the US government shutdown all about?

Updated: Tuesday, October 1, 2013, 15:21 [IST]

The US government shutdown is a political condition wherein the government ceases to grant all but essential services including fire-fighting, police services etc. As the Federal government has fallen short of money to pay for its bills, partial shutdown has resulted in the US Congress unable to pass a budget, which pays for salaries and other bills.

Why is this happening?

Congress is accountable for passing the budget for different government functions and agencies usually via several spending bills well in advance before the end of the fiscal year on 30th September each year. However, due to the disagreement of Republican-led House of Representative and Democratic-controlled Senate on the budget and fiscal policy, the US government is confronting the shutdown for the first time since the year 1996.

What will be the impact of the shutdown?

The impact of the shutdown is expected to be severe and would hurt certain government agencies more harshly in comparison to others. Over 0.8 million non-essential government workforce would be furloughed for unknown period of time and businesses and citizens would be denied of indispensable services. However, some of the important functions including the national security would remain intact and operate in a regular manner. Also, people held responsible for the launch of Obama's healthcare law would work likewise as their funding is not linked to annual spending bill. Thus, the shutdown would eventually slow down the pace of economic growth in the US.

For how long the US government shutdown likely to last?

The tenure of the shutdown is hard to determine as it has resulted on account of ideology and not due to technical glitches. In the year 1995 and 1996, the US government shutdown on account of difference between Republican-controlled House of Representatives and Democratic President lasted for 21 days.

Experts are of the view that the shutdown of the US government is likely to spook investors across global markets and result in sharp volatility in stock markets. The currency market in the US is expected to witness weakening of the US dollar that though is likely to be temporary.

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