Will the US be bankrupt soon?: Here’s what the shutdown means for the US and the world

In the event of a government shutdown – government activities in the US are temporarily halted. People who are employed by the state no longer go to work and are no longer paid. This also has consequences for public life: parks are no longer cleaned, state-funded initiatives are no longer implemented.

There have been twenty closures since 1976. Three of them have gone down in American history. Once, in 1995, under President Bill Clinton (77), it lasted 21 days. Once in 2013 under Barack Obama (62), this shutdown lasted sixteen days. And once under Donald Trump (77).

The latter was the longest shutdown in US history, lasting from December 2018 to January 2019. Trump refused to sign a budget bill that did not include $5.7 billion for a border wall along the US border with Mexico. The costs of the shutdown were enormous, and Trump’s poll numbers were in the basement.

Simply put, a law known as the Anti-Deficiency Act prohibits federal agencies from spending or obligating money without congressional approval. So if Congress doesn’t agree on all 12 appropriations bills — as they’re called — there’s a risk of a shutdown.

The crisis is largely caused by the relatively weak position of Kevin McCarthy (58), the Republican chairman of the House of Representatives. Since his election last January, he has been in constant conflict with a small minority of right-wing extremist Republicans.

Those same rightists are now holding McCarthy hostage by refusing to vote for the appropriations bills that the speaker previously agreed to with Biden. In theory, McCarthy could still pass the bills with the support of Democrats on the other side of the aisle. But those on the right — especially Florida Congressman Matt Gaetz, 41 — have vowed to remove him as chairman if this happens.

The countdown is running. The US fiscal year ends on Saturday, September 30. Speaker McCarthy wants to appeal for transition funding: based on last year’s budget, this should ensure the authorities’ funding for a few weeks. He hopes that the House of Representatives will find a solution during this time.

Last week, McCarthy’s idea failed because of hardliners on the right-wing fringe of his group. From their point of view, the upcoming shutdown is an opportunity to gain more influence. For example, when it comes to the question of how to deal with the US’s spiraling debts.

Yes. For example, McCarthy wanted to cut $300 million for Ukraine from the draft defense budget to appease some conservative hardliners.

The business portal “CMC Markets” also assumes that the shutdown will have consequences for the global economy. However, the consequences of the latest US shutdowns were never as bad as feared. That could be the case this time too.

The US Federal Reserve is also holding its breath and leaving its key interest rate at a high level. The possible shutdown could have such a negative impact on the US economy that the policy interest rate would even have to be raised, Fed Chairman Jerome Powell (70) said last week.

A shutdown is usually seen as a political failure. But it is still unclear who will suffer the most damage. McCarthy fears that the Republicans’ internal struggle will damage the party’s image.

In the past, however, the majority of sitting presidents were blamed for the shutdown. For example, the shutdown in 2018 and 2019 greatly damaged Trump’s poll numbers. In the current case, Democratic Biden would suffer.