As of September 29, 2025, the US federal government is on the verge of a shutdown.
Funding for most discretionary government operations expires at midnight on September 30, 2025, marking the start of fiscal year 2026.
Congressional leaders met with President Trump at the White House today, but no agreement was reached on a continuing resolution (CR) to extend funding.
Prediction markets like Kalshi now estimate the probability of a shutdown at 68%, up from 56% earlier this week, with bets totaling $1.2 billion, reflecting heightened investor anxiety.
The impasse stems primarily from partisan disputes over the extension of the Affordable Care Act’s (ACA) premium tax credits (which expire at the end of 2025) and provisions related to health care for undocumented immigrants, with Republicans controlling the White House, the House of Representatives, and the Senate rejecting Democratic demands. If no agreement is reached, non-essential operations could be halted as early as October 1.
This would be the first shutdown under a unified Republican administration since 2018-2019, when a 35-day impasse cost approximately $11 billion in economic activity. While disruptive, their effects are often short-lived if resolved quickly; however, prolonged shutdowns amplify the damage.
A shutdown would temporarily suspend hundreds of thousands of federal employees and suspend non-essential services, based on contingency plans based on previous events (e.g., 2018-2019).
Essential functions, such as active military pay, Social Security disbursements, and air traffic control, would continue, often with personnel working without pay and subsequently receiving retroactive compensation under the Government Employees Fair Treatment Act of 2019. Below is a summary of the major affected areas.
Federal contractors with committed funds from prior years can often continue working, but communication with program leaders may be limited.
Broader Consequences
Historical shutdowns (e.g., the 16-day shutdown in 2013 cost $24 billion; the 35-day shutdown in 2018-2019 cost $11 billion) show a minimal drag on long-term GDP (approximately 0.02% to 0.1% annually), but uncertainty erodes confidence.
This time, with inflation at record highs and job growth slowing, a shutdown could exacerbate volatility; for example, airline stocks fell due to the FAA/TSA tensions, and cryptocurrencies and markets moved to safe-haven assets like gold (+1.97% today).
Delays in economic data could force the Federal Reserve to turn to private sources, potentially misaligning rate cuts.
Vulnerable groups are the hardest hit; for example, WIC cuts affected 6.6 million women and children; delayed tax refunds affect low-income families; national park closures limit tourism revenue (an estimated $40 billion annually before 2018).
Laid-off workers face financial hardship, and past closures have been linked to rising food insecurity and mental health issues.
Politically, the blame largely falls on Democrats for linking funding to healthcare for immigrants (a demand of approximately $1.5 trillion), although Republican rejection of extensions of the Affordable Care Act (ACA) could generate a backlash in the 2026 midterm elections.
Defense contractors continue to operate if they receive funding through previous legislation such as the One Big Beautiful Act; But RIFs could accelerate Trump’s promised reduction in government personnel (up to 95% according to some speeches). Cryptocurrencies and decentralized finance (DeFi) are seeing capital outflows amid macroeconomic uncertainty; airlines are facing operational slowdowns.
