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What is a US shutdown and why it happens
- Team Kautilya
- 2 days ago
- 3 min read
SYNOPSIS
What does the world's largest economy look like when it goes on pause out of the blue? This blog reveals the secret behind America's government shutdown—its subtle triggers, economic shockwaves, and global domino effect few people discuss.
What Is a Government Shutdown? Picture the world's largest organization — millions of workers, vital services, global obligations — abruptly brought to a standstill. Not because it lacked funds, but because the authorities can't find common ground on how to spend it.
That's a U.S. government shutdown. Fundamentally, it's not about the absence of money, but the absence of consensus. Each year, the U.S. Congress has to reach agreement on how to allocate the government's money for the next 12 months. If they fail to enact the necessary budget bills prior to October 1 (the beginning of the U.S. fiscal year), the government legally is not allowed to spend money. Employees who conduct "non-essential" work — such as operating museums, handling passports, or preserving national parks — are briefly sent home without compensation. This is referred to as a furlough. Necessary workers, for example, air-traffic controllers or military personnel, continue to work, yet they don't receive pay until the shutdown is over.
Why Does It Happen? You may have heard the term “U.S. government shutdown” in the news and wondered — how can one of the world’s biggest governments just stop working? Surprisingly, it happens more often than you’d think — and it’s mostly about politics and money. A shutdown typically occurs because lawmakers can't agree to spend the budget. Occasionally one side will want to reduce spending while the other side will want to spend more. Other times, politicians will use the budget to push other unrelated things — such as immigration or healthcare policy — which holds up the agreement. Since 1977, there have been 10 major shutdowns in the U.S., including the longest ever (35 days) in 2018-19, when President Donald Trump and Congress waged a battle over border-wall funding. The Donald Trump administration announced on 3 october 2025 that it has frozen $2.1 billion in Chicago transit funding , as the government shutdown marked it’s third day on Friday. Also the ruling US government has frozen atleast $28 Billion in funding for Democratic cities and stated amid trump’s campaign to use the US Government power against his Democratic rivals.
What Are the Effects? Shutdowns don't only hurt government employees — they hurt everyone.
·In the 2018-19 shutdown, the U.S. economy lost approximately $11 billion, and $3 billion of that was lost forever, said the Congressional Budget Office.
·In the ongoing 2025 shutdown, approximately 750,000 federal workers were furloughed and 700,000 more continue to work without pay.
·Economists project that every week the government remains closed, the economy loses $7 billion to $15 billion in output.
Aside from the statistics, daily life suffers as well — passport agencies get backed up, national parks shut down, and research projects are put on hold.
Consequence on India
·H-1B and green card processing delays: Indian IT professionals were affected by the slowdown in visa processing. This results in delayed relocations, delayed projects, and uncertainty for families and tech workers.
·Sentiment risk : A prolonged US slowdown will have a ripple effect on India's export and outsourcing industries.
·The Indian rupee may depreciate if the deadlock prolongs. Nevertheless, India's macro fundamentals are strong, and expert consensus is towards long term capital flow and investor confidence revival.
Conclusion
An American government shutdown isn't something about the nation "running out of money" — it's a matter of political stalemate. When politicians can't compromise, the government literally comes to a stop. The outcome? Millions of individuals and businesses are put into limbo — and the longer this drags on, the more costly it gets.
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