The United States finds itself on the verge of budgetary paralysis this Friday, December 20, after the successive failures of several texts in Congress, and while no solution to the crisis is in sight for the moment. At midnight local time (6:00 a.m. French time, Saturday), the federal state will find itself in an effective “shutdown” situation, with consequences on the operation of certain public services.
Why this risk of paralysis?
However, Congress was well on its way to avoiding this situation on Tuesday when the Republican President of the House of Representatives, Mike Johnson, announced that he had reached an agreement with the Democrats. But the text was torpedoed the very next day by Donald Trump and Elon Musk. The president-elect denounced a text that was “ridiculous and extraordinarily expensive”. His ally, the richest man in the world, had launched a virulent burst of posts on his social network X to express his opposition, urging elected officials to “kill the text”.
A way out of the impasse was glimpsed on Thursday, when Donald Trump gave his blessing to a new text, which included an extension of the deadline on the United States debt ceiling to January 2027. But while both third of the votes were necessary for adoption, the new text did not even reach a simple majority, with 38 Republicans joining the Democrats’ “no”.
The United States has the particularity of regularly coming up against a legal constraint concerning its credit capacity: this debt ceiling, i.e. their maximum amount of debt, must be formally raised or suspended by Congress. A suspension decided in 2023 expires at the beginning of January and the United States should reach the ceiling in June.
Who will be affected?
If no agreement is reached by this Friday midnight, many civil servants will find themselves unemployed, or “875,000 workers” according to Shai Akabas, expert at the Bipartisan Policy Center in Washington. “1.4 million” people “would continue to work, as they are considered to provide essential services”, such as air traffic control and policing.
Civil servants will only receive their salaries at the end of the “shutdown”, according to Bernard Yaros of Oxford Economics. A budget shutdown “would force hundreds of thousands of federal employees, […] to work during the holiday period without receiving a salary,” warned the federal government employees’ union (AFGE) in a press release published Thursday.
“This can cause major financial disruption for households,” said Shai Akabas. During the paralysis of 2013 and early 2018, “around 850,000 of the 2.1 million federal employees (excluding the postal service) were placed on technical unemployment”, recalls the Committee for a Responsible Federal Budget (CFRB), a bipartisan organization.
What consequences?
Each ministry or agency establishes its own plan in the event of a “shutdown” but essential services – such as border protection, hospital medical care, maintaining order or even maintenance of the electricity network – continue to operate.
Previous times, expenditures linked to pensions as well as the health of low-income and elderly people (Medicare and Medicaid programs) had also been maintained, but registration requests had been postponed, underlines the CFRB.
For how long?
The duration of a possible “shutdown” remains unknown for the moment, but Bernard Yaros estimates that it could extend up to two weeks, a usual pay period in the United States. “Pressure to resume government operations would quickly mount as federal employees lose their paychecks and worry they won’t be able to receive another one,” he added.
The longest shutdown in US history lasted 34 days, in December 2018 and January 2019, under the presidency of Donald Trump.
What economic impact?
“Shutdowns have been shown to have an impact on the US economy, reducing growth by around 0.2 percentage points once the effects on the private sector are taken into account, explained Thibault Denamiel, researcher at the American think tank Center for strategic and international studies (CSIS).
“The simple fact of having to prepare for a ‘shutdown’ entails costs”, particularly for “the taxpayer”, underlined Shai Akabas. Markets are not generally hit hard by the shutdown, but analysts may wonder whether it is a warning sign from the new administration, added David Wessel of the Brookings Institution.
The course of action is now uncertain for the Republican President of the House of Representatives. Mike Johnson is being pressed on the one hand by the Democrats to return to the negotiated agreement, and on the other by certain conservative elected officials who are refusing outright any text that does not include a budget cut to compensate for the new aid. He promised Thursday evening that elected officials would “come together and find another solution”.