Without passage of a budget or a continuing resolution, four appropriations areas of the U.S. government would shut down at midnight on March 1. This includes Agriculture, Rural Development, and the Food and Drug Administration; Energy and Water Development; Military Construction and Veterans Affairs; and Transportation, Housing and Urban Development.
Then without further action, eight remaining appropriations areas would shut down at midnight on March 8. This two-tiered deadline for a government shutdown is a result of the two most recent continuing resolutions. These set different deadlines for groups of appropriations areas rather than a single deadline for government funding to expire.
Continuing Resolution Still Possible
Despite the tight timeline, it still appears likely that a continuing resolution is passed. That’s because similar to the past three deadlines, there may be bipartisan support for a continuing resolution to keep the government open.
Congressional leaders are scheduled to meet with President Biden on Tuesday to discuss measures to avoid a shutdown. However, a continuing resolution is not certain, and there could be disruption if the government does shutdown.
Forecasting site Kalshi currently puts the chance of a government shutdown on March 4 (the first working day after the shutdown deadline) at around 20%, that’s at a similar level as over the past 2 weeks. So a shutdown is still viewed as relatively unlikely despite the tight timeline.
Delayed Paychecks
The primary impact from a shutdown is the delay to paychecks of government employees. Legislation guarantees backpay once any shutdown ends, but a delayed paycheck would have a significant economic impact for many households.
Some employees in essential roles would be required to work without pay, others would be furloughed, but still receive backpay once any shutdown ends. However, the impact of this would be mitigated by only four of the twelve appropriations areas shutting down at midnight on March 1, hence many parts of government would remain operational at least for an additional week were a partial shutdown to occur.
Other Impacts
Then based on the list of agencies involved in a potential partial shutdown on at midnight on March 1, specific government functions would initially be impacted. For example, the Department of Agriculture funds the Supplemental Nutrition Assistance Program (SNAP), though activity wouldn’t end immediately in the case of a shutdown. That’s in part because funds for SNAP are allocated a month in advance and also because additional funds may be used to keep SNAP temporarily in place during any shutdown according to the Food Research and Action Center. Therefore, it’s likely only a prolonged shutdown would put SNAP benefits at risk.
Elsewhere applications for Federal Housing Administration loans and payments for subsidized housing may be delayed were the government to shutdown. This could have implications for the housing and rental markets, depending on the duration of any shutdown. Certain veterans services such as career counseling and cemetery maintainence could be impacted too.
However, if a budget or continuing resolution is passed before March 8, then other typical impacts of a shutdown such as the potential closure of national parks or delays in loans to small businesses would not initially occur. That’s because the relevant deadline for those agencies comes on March 8.
Certain other operations of government such as Social Security, Medicare and Medicaid and the U.S. Postal Service would continue during a shutdown due to separate funding and budgetary processes.
Still, regardless of whether or not a shutdown occurs, the agencies potentially involved must plan for the eventuality of a shutdown as it draws closer. That means defining which operations would continue and which would shut down and working on staffing levels and contingency plans. This consumes time and resources regardless of whether any shutdown ultimately occurs.
The impact of a government shutdown is somewhat proportional to its length, with longer shutdowns typically having greater economic impact. If the government were to see a partial shutdown at midnight on March 1, then its initial scope would be relatively narrow as only four of the twelve budget appropriations areas would be impacted.
However, by March 8, if a shutdown were to continue, the scope would broaden to all twelve appropriations areas and any shutdown would become more significant. Still, for now, there’s a good chance according to forecasting markets that any material shutdown is avoided by the passage of a continuing resolution.
