The government is funded through March 14 through a Continuing Resolution (CR), P.L. 118-158. Come the Ides of March, there will not be a full-year appropriation for any Department or agency in the federal government. House and Senate Republican leadership have been intensely focused on passing budget resolutions to start the reconciliation process that they hope will eventually deliver the President’s requested tax cuts and border money. Appropriations for FY25, the year that began last October, have taken a back seat.
Longest Shutdown—2018-2019. The longest partial government shutdown, or lapse in appropriations, occurred under the first Trump Administration, and lasted five weeks from December 2018 to January 2019. That shutdown affected nine Cabinet Departments: Homeland, Treasury, State, Commerce, Justice, Agriculture, Interior, Transportation, and Housing and Urban Development.
Shutdowns are costly and damaging. The Congressional Budget Office (CBO) estimated that the 2018-2019 shutdown delayed $18 billion in federal discretionary spending and caused the Gross Domestic Product (GDP) to be reduced by $11 billion. Once the shutdown ended, CBO expected that government spending would resume, and the government would expend the entire $18 billion in the remaining months of the fiscal year. Regarding GDP, CBO expected a rebound, but not a complete one, stating “The negative effects on GDP will be only partially offset by the subsequent positive effects because not all forgone economic activity will be recovered.” CBO continued: “Although most of the real GDP lost during the last quarter of 2018 and the first quarter of 2019 will eventually be recovered, CBO estimates that about $3 billion will not be.”
The options for March 15 are 1) Congress passing another Continuing Resolution (CR), for part or all of FY25; or 2) A shutdown, which could last between a day (until another CR is enacted) to several weeks or more. During the 2018-2019 shutdown, basic functions of safety and national security were continued (by exception) during the five weeks; 500,000 employees supporting those “excepted” functions were required to work but were not paid during the shutdown; 300,000 employees were furloughed. A 2019 law, the Government Employee Fair Treatment Act of 2019 (P.L. 116-1), guarantees retroactive pay for federal government employees once a shutdown ends, but the law does not include military pay.
A 2025 shutdown would be broader with a larger economic impact. The negative impacts make a strong argument to the administration and Congress against a prolonged shutdown. A key difference in the 2018-2019 shutdown versus the 2025 situation is that 100% of the government funded through discretionary appropriations will be affected in 2025. In 2018, seven departments were not shut down because Congress had completed five full-year appropriation bills in September 2018, which accounted for over 70% of FY19 appropriated funds. Notably, the seven included the Departments of Defense, Veterans Affairs, and Health and Human Services. They were funded for the year and operating normally—in those departments, no pay for military personnel, veterans healthcare, or cancer researchers was delayed, no military operations or clinical trials were jettisoned, and no contracts or grants were cancelled or postponed due to a lapse of funding. That is a significant difference from the 2025 potential shutdown scenario.
The nationwide impact of a pay stoppage for over 2,000,000 federal employees is shown in the graphic below that illustrates the work locations of civilian federal employees. Although many federal employees and members of the military are stationed in the Washington, D.C. area, approximately 85% of federal employees work outside of the D.C. area. Over 1,100,000 active duty members of the military are similarly spread across the country and globe, with concentrations in California, Texas, Virginia, and North Carolina. This dispersion becomes a factor when Members of Congress are hearing from their constituents about economic effects of pay loss on individuals, families, and their local communities.
Map I. Note: Civilian employees posted overseas or in U.S. territories not included. Source: Congressional Research Service, FBIQ
If there is a March 15 shutdown, military personnel (and everyone else funded by discretionary appropriations) will not be paid until the shutdown has ended. Deployed military cannot pick up a side job during a shutdown; they will be required to work without pay. Not paying troops becomes a personal financial hardship, a national security risk, and a severe political problem. In addition to the armed forces, Federal Aviation Administration air traffic controllers and Border Patrol Agents would be required to work without pay through the shutdown. The Internal Revenue Service would be shut down at the peak of tax season. Almost every non-military function of the government could potentially be affected this time around, from veterans’ health care to small business loans, food inspection to drug trials.
Every agency is required by the Office of Management and Budget to have an up-to-date shutdown plan that includes what it would do if the shutdown is short—one to five days—or is more prolonged. The longer a shutdown lasts, the more severe the impact on government services. During longer shutdowns the White House may try to mitigate the harm by directing agencies to bring back more furloughed employees to work without pay.
OUTLOOK
No one might be listening to appropriations leaders, civil servants, federal contractors, or the rank-and-file military right now, but for the reasons noted above, Congressional leaders will want to avoid a prolonged shutdown. Long shutdowns do not save money. Instead, they reduce services to citizens and hamper revenue collection and growth, while revealing U.S. governing challenges to the world and financial markets. The most likely scenario by March 15 is a short CR (potentially to April 11, before Congress leaves for the spring recess), while appropriations committees negotiate FY25 details. However, if the House and Senate cannot work out a top line number deal, appropriators will be reduced to working out a full year CR.