Federal Government Shutdown Already Affecting Businesses

The ongoing government shutdown is expected to have a wide range of impacts on businesses, including travel, financing and supply chains.

The shutdown began on Oct. 1 after Congress failed to approve funding for the federal government. The central issue is that Democrats are demanding that any funding bill include an extension of the enhanced subsidies for the Affordable Care Act (ACA) that were approved during the Biden administration and are set to expire at the end of 2025. Without the enhanced subsidies, ACA premiums would increase by 75 percent on average, according to KFF, an independent health policy research firm.

Republicans, however, put forward a “clean” continuing resolution that would have funded the government through mid-November at current levels. That bill failed in the Senate on a 55-45 vote, with 60 votes needed to pass the filibuster. Sens. Catherine Cortez Masto (D-NV), John Fetterman (D-PA) and Angus King (I-ME) joined 52 Republican senators in voting for the continuing resolution. Sen. Rand Paul (R-KY) voted against the bill because it would have increased deficit spending.

Little progress has been made between the two sides since the shutdown began, creating uncertainty over how long it will last. A memo published by the U.S. Chamber of Commerce listed several factors to watch for as indicators that the standoff could end. Those include:

• The Impact of the Trump Administration’s Actions to Make Permanent Changes: The White House has warned that rather than furloughing nonessential government workers, as has been done in past shutdowns, it could instead make permanent reductions in force for government programs it does not believe should be funded. According to the U.S. Chamber, that strategy could either prompt Democrats to agree to reopen the government to avoid layoffs in programs they support, or it could cause them to become further entrenched.
• Payday: Missing the next major payday for civilian and military employees the week of Oct. 12 could create pressure to end the shutdown.
• The Level of Media Attention: In the past, government shutdowns have received nearly nonstop negative media attention as citizens and businesses experience hardships, encouraging policymakers to pass funding bills.

Although this is the sixth time in the past 30 years the government has shut down, the U.S. Chamber noted that the political conditions and recent funding boosts for some agencies in the One Big Beautiful Bill Act have made this situation unlike those in the past. “While far from certain, the current political dynamics suggest that this shutdown could be on the longer end of the historical norm for a full government shutdown, possibly stretching past the middle of October,” the U.S. Chamber said.

While he agreed that this shutdown feels like it will be measured in weeks not days, Brian Wild, chief government relations officer for the National Association of Wholesaler-Distributors, believes it will ultimately end with a continuing resolution. “Since this is as much a political disagreement driven from each party’s base as a policy fight, it will be incredibly difficult for either Senate Minority Leader Chuck Schumer (D-NY) or Trump to back down,” Wild said in a government relations update. “Therefore, the likeliest outcome is that eventually eight Democratic senators feel enough pressure to side with Republicans and pass a clean continuing resolution and live to fight about health care benefits later in the year.”

A prolonged shutdown is likely to amplify issues for businesses. The previous shutdown, which lasted 35 days from December 2018 to January 2019, cost the country an estimated $11 billion in economic output, according to the Congressional Budget Office. The effects of this shutdown are already being felt. The Small Business Administration’s loan programs, which normally support $860 million worth of loans for 1,600 small companies every week, are currently closed. Companies that are federal contractors have had to stop work on projects and air travel is seeing more delays due to limited federal staffing in air traffic control.

Slowdowns in manufacturing and supply chains are also anticipated, as federal workers are unable to issue permits, conduct facility inspections or approve products. “A functioning government is essential for a strong manufacturing economy,” Jay Timmons, president and CEO of the National Association of Manufacturers, said in a statement. “Manufacturers need certainty, not disruption. Our leaders in Washington must come together and keep the government open, so it continues working for the American people.”

Some essential federal agencies are still operating, although many with reduced staff. The Federal News Network has compiled a list of federal agencies’ shutdown plans, which can be found here.