“Shutdown”: the United States a few hours from budgetary paralysis, barring any twists and turns

Barring a last-minute development, the United States is only a few hours away from a paralysis of its administration, the famous “shutdown”

“Shutdown”: the United States a few hours from budgetary paralysis, barring any twists and turns

Barring a last-minute development, the United States is only a few hours away from a paralysis of its administration, the famous “shutdown”. Thus, without an agreement in the coming hours, the world's largest economy is expected to slow down from Sunday October 1: 1.5 million civil servants will be deprived of wages and air traffic will be disrupted, while visitors to national parks will find their doors closed.

The reason ? Neither chamber of Congress – neither the Democratic-controlled Senate nor the Republican-controlled House of Representatives – has yet managed to pass a budget bill to extend the federal state budget, which expires at midnight Saturday night (6 a.m. Paris time). To be adopted, this text would have to pass both chambers.

Against a backdrop of disagreements between the two camps, but also between the conservatives themselves, Kevin McCarthy, the Speaker of the House of Representatives, proposed on Saturday morning a final attempt to prevent the cessation of the activities of the federal administration, which would however require the support of Democrats. This would involve adopting an emergency measure (known as “stopgap”) which would allow the administration to continue to be financed for 45 days.

“I ask Republicans and Democrats to put their political differences aside. Think of the Americans,” Mr. McCarthy urged the press. Will he be able to get her to vote? He admitted he wasn't sure.

Indirect repercussions on the war in Ukraine

His proposal “does not include a budgetary component for Ukraine,” he also clarified. The White House had initially demanded that the finance law passed by elected officials include $24 billion in military and humanitarian aid for kyiv. The budgetary crisis would therefore have direct repercussions on the war in Ukraine.

Aware of the risk of fatigue on the part of the great American ally, Ukrainian President Volodymyr Zelensky went to Congress last week to try to convince the United States to help him cross "the finish line" in the face of Russia. Almost a year before the presidential election, the two camps are blaming each other for this situation, which is very unpopular with Americans.

“Some members of Congress are so divisive that they are ready to shut down the government tonight. This is unacceptable,” Joe Biden lambasted Saturday on X (ex-Twitter). The release of funding requested by the Democrats for Ukraine appears increasingly uncertain, given the direction the negotiations are taking behind the scenes. A handful of Trumpist Republican elected officials refuse to release any new aid to kyiv, believing that these funds should be allocated to managing the migration crisis in the United States.

A long “shutdown” in winter 2018-2019

These lieutenants of Donald Trump, who have disproportionate power due to the very thin Republican majority in the House, had already pushed the United States to the brink of the political-financial precipice four months ago on the issue of raising the debt ceiling. And they received orders from the former president, who could face Joe Biden in 2024, to “paralyze” the federal state unless they win their case on “all” the budget issues under debate.

Elected at the cost of numerous negotiations with the Trumpists, Mr. McCarthy even risks his seat in these negotiations. “You know what, if I have to risk my position to defend the American people, I will,” he assured Saturday, profusely: “if someone wants to fire [me] because I want to be the responsible adult from the room, let him try.”

It was under the presidency of Donald Trump that the United States experienced its longest “shutdown”, during the winter of 2018-2019. According to several estimates, the country's GDP was then cut by more than 3 billion dollars. A few hours before the deadline, the country is preparing for a new total or partial closure of services. Officials began to be notified of the impending paralysis.

Most of America's famous national parks like Yosemite and Yellowstone will close. Air traffic is also expected to be very disrupted since air traffic controllers and officials from the Transportation Security Agency (TSA) are affected. And some recipients of food aid could be temporarily denied it.

Each week of “shutdown” could also cost 0.2 points of growth to US GDP in the 4th quarter, according to a note from economists at Goldman Sachs.