On Oct. 1, the U.S. government shut down after lawmakers failed to reach a budget agreement before the start of the new fiscal year. The federal funding lapse reflects the ongoing divide between Democrats and Republicans over whether to extend federal health care subsidies under the Affordable Care Act (ACA). As of press time, no agreement has been reached yet in Congress, leaving the government closed.
Source: Rahmat Gul, AP News
A government shutdown occurs when Congress is unable to pass appropriations bills that finance the operations of federal agencies and programs. The current shutdown centers around tax credits that have helped make healthcare more affordable for millions of Americans since the COVID-19 pandemic. At the end of this year, these subsidies are set to expire if Congress does not vote to extend them, which will affect low- and middle-income people who purchase healthcare under the ACA.
“While Democrats want to extend these subsidies, Republicans want to reduce or eliminate them, which will lead to higher insurance premiums,” said Dr. Isil Akbulut Gok, Interim Chair of the Political Science and Global Affairs Department at Sacred Heart University.
According to the Associated Press and data collected from the health care research nonprofit Kaiser Family Foundation (KFF), around 24 million people have signed up for health insurance this year through the Affordable Care Act. Without an extension of the tax credits, ACA enrollees could see their premiums increase by an estimated 114%, averaging $1,016 next year, according to KFF.
Beyond the dispute over health care subsidies, the shutdown is affecting hundreds of thousands of federal employees and disrupting government operations. Traditionally, furloughed federal employees receive back pay once a shutdown ends, but this time, the current administration has indicated that reimbursement is not guaranteed. Additionally, the Office of Management and Budget reported in a court filing on Oct. 10 that over 4,100 federal employees from eight departments and agencies could be fired due to the shutdown, which is an unprecedented action.
“This current shutdown is somewhat different in its impact. For instance, the White House is now threatening permanent layoffs, not just furloughs,” said Akbulut Gok. “This could lead to longer term job cuts and loss in the federal workforce and could have lasting damage on the economy.”
During the longest U.S. shutdown in 2019, which lasted 35 days, the Congressional Budget Office estimated that the Gross Domestic Product (GDP) fell by just 0.02%. Still, experts warn the current shutdown could affect consumer confidence and broader economic activity, as disruptions in federal services and delayed data could create ripple effects for businesses and households.
“One area to watch is consumer confidence. If this shutdown stretches longer than usual, public sentiment could weaken in ways that are harder to quantify or predict,” said Dr. Stephen Rubb, professor of Economics at SHU.
“We don’t have reliable data from the Bureau of Labor Statistics, so it makes it more difficult for businesses to make investment decisions, and even for the Federal Reserve to decide on interest rates,” said Dr. Lucjan Orlowski, professor of Economics at SHU.
This government shutdown reflects how political divisions in Congress can impede action on key issues that affect millions of Americans.
“Both parties are responsible for not being able to get a deal done. Republicans and Democrats have to work together, and right now, they are extremely divided,” said senior Timothy Toronto, vice president of College Democrats.
“It is very sad and concerning that both parties can’t come together to help the American people,” said junior Juliana Morello, president of College Democrats. “The American people should always come before a political party.”
Government shutdowns can also contribute to declining public confidence, as prolonged stalemates highlight the difficulty of getting Congress to fund and operate federal programs effectively.
“Historically, government shutdowns have a negative effect on public confidence in government and democratic institutions,” said Akbulut Gok. “Shutdowns highlight political gridlock and the failure of elected officials to compromise.”
Lawmakers continue negotiating to end the shutdown, hoping for a compromise on healthcare subsidies and federal funding to prevent further disruptions for workers, businesses and millions of Americans.
“Both sides have to be willing to compromise,” said Dr. Gary Rose, professor and Scholar in Residence of Political Science and Global Affairs at SHU. “Republicans need to compromise on the subsidies somewhat while Democrats have to realize that health care expenditures have risen to an incredibly high level and thus agree to trim down their demands on the subsidies.”
The Associated Press contributed to this article.
