Background

Under US law a new bill for the funding of the new financial year, must be approved by the House of Representatives,the Senate and   the President.

It’s been 17 years since the federal government last faced a partial shutdown because Congress and the President couldn’t agree on a spending bill.

Fiscal year

In US term is October 1 to September 30

Crisis

Ended midnight of Monday and US declared government ‘Shutdown’

Cause

Under the Constitution, Congress must pass laws to spend money.If Congress can’t agree on a spending bill,then it does not have a legal authority to do so.

Why it happened?

Money!

In US the Republican Party control the House of Representatives or Lower House and on the other hand Democrats control the Senate. The Republican controlled house has passed a spending bill that maintains spending levels but does not provide funding to implement  the “Obamacare”. The Democratic Senate insists that the programme be fully funded and the Congress pass “clean” CR (continuing resolution without policy changes)

Time Horizon of Shutdown

It begins at the fiscal year end midnight of Monday and untill the President signs a spending bill.

Has Shutdown happened in the past?

Since 1977 there has been 17 shutdowns.Most lasted not more than 3 days and the longest being of 21 days from December 16,1995 to January 5,1996.

Consequences

Essential services,such as security and transfer of payments will continue but thousand of workers of non essential services would be asked to take an unpaid holiday.

Difference between a shutdown and a debt crisis

In a shutdown,the government does not have a legal authority to spend money on non essential services. In debt crisis, the government has mandated right to spend money but does not have the legal authority to borrow the money to spend it.