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Zhao Ying, Wall Street Insights
On November 12, local time, the U.S. House of Representatives voted to pass a temporary federal government funding bill previously passed by the Senate, taking a decisive step towards ending the longest government “shutdown” in U.S. history.
The bill would provide continued funding to the federal government, allowing most government agencies to receive operating funding until January 30, 2026.The White House stated that US President Trump will sign the bill on the evening of the 12th to allow the government to fully resume operations.
The shutdown, which began on October 1, has lasted 43 days, with hundreds of thousands of federal employees forced to take leave or work without pay.Flights are delayed, the release of key economic data is blocked, food subsidies for millions of families are at risk, and national parks and museums are closed.House Speaker Mike Johnson expressed optimism about the bill’s passage, and the House Freedom Caucus has expressed support.
Senate Democrats previously insisted that any agreement to restart the government must include an extension of the Affordable Care Act (ACA) subsidies, but in the end eight members of the Democratic Caucus defected and supported the Republican plan to restart the government first and then vote on health insurance subsidies in mid-December.House Democratic leaders asked members to oppose the bill, saying it lacked health care provisions.
After the shutdown ends, the government will face a long process of reopening.It could take days or even more than a week for the government to return to normal operations, with payroll systems needing to be updated to cover weeks of back pay and backlogs of grants, loan applications and customer calls clearing.Transportation Secretary Sean Duffy said flight restrictions would begin to be lifted within a week of the government reopening, just in time for the Thanksgiving travel rush.The Congressional Budget Office estimates that the six-week shutdown will reduce fourth-quarter GDP by 1.5 percentage points, resulting in a net loss of about $11 billion..
Last-minute disputes failed to halt progress
A provision in the bill that would allow senators to seek compensation for $500,000 if federal investigators collect their phone records without their knowledge sparked a backlash from lawmakers on both sides of the aisle before the vote.The provision is believed to be designed for eight senators whose records were obtained during former special counsel Jack Smith’s investigation into Trump’s efforts to overturn the 2020 election.
Several Republican lawmakers said they did not want to delay the government’s reopening because of their opposition to this provision, but planned to repeal it through separate legislation afterwards.Johnson said on Wednesday that Republicans would introduce a standalone bill next week to repeal the rule.
The House Freedom Caucus praised the funding package in a memo as “a comprehensive victory for HFC, conservative leadership and messaging.”Republican Rep. Victoria Spartz, who previously voted against the temporary funding bill in September, said she would vote in favor of the bill.Republicans hold a slim majority in the House and most Democrats are expected to oppose the bill, but possible defections include Maine Rep. Jared Golden and Texas Rep. Henry Cuellar.
House Minority Leader Hakeem Jeffries said Democrats will continue to push legislation to extend health care subsidies, including a new bill that would extend subsidies for three years.He said at a news conference Wednesday that Democrats would pressure Republicans to support the proposal.”This battle is not over yet,” he said.
The restart process may take days or even weeks
The government’s reopening cannot officially begin until an appropriations bill is passed by Congress and signed by President Trump.The House could pass Senate-approved legislation as soon as Wednesday night, but many agencies may not be able to resume operations until Friday or even next Monday, depending on how quickly the legislation proceeds.
Federal officials have warned that some shutdown-related restrictions will remain in place.Transportation Secretary Duffy said on Wednesday that flight restrictions would begin to be lifted within a week after the government reopens, a timetable that is just in time for the Thanksgiving travel peak.Delta Air Lines CEO Ed Bastian said Wednesday that Thanksgiving holiday travel should be “fine.”
While federal employees will receive back pay, the agency warned that recalculating wages may take time.A 2019 law requires agencies to pay employees their full wages during the shutdown “as early as possible” after the funding interruption ends.But after the 2019 shutdown, it took air traffic controllers about two to two and a half months to be fully compensated, said Nick Daniels, president of the National Association of Air Traffic Controllers.
Duffy promised the operation would be faster this time.He said controllers will receive 70% of their back pay within 24 to 48 hours of the government reopening, with the remainder paid about a week later.
The economic impact is difficult to completely eliminate
Gregory Daco, chief economist at accounting firm EY, said that this is more of a stimulus than a shock to the economy, but this stimulus is becoming larger and larger.It won’t take more than a few weeks for a government shutdown to leave a lasting mark on the economy, and we’re just starting to see that.
A report released by the Congressional Budget Office last month showed that the combined impact of the six-week shutdown would reduce fourth-quarter GDP growth by 1.5 percentage points.Reopening the government will reverse much of the impact as back pay will be paid to workers.But it will still result in a net loss of GDP of about US$11 billion.Some canceled travel plans will not be rescheduled, and some federal contractors will not be able to recoup all losses.
A shutdown will not save the government money.A bipartisan Senate report in 2019 found that the shutdown cost the United States more than $300 million in additional administrative work, lost revenue and late fees.Additionally, while the White House laid off thousands of employees during the shutdown, the legislation that funds the government requires that they be rehired.Federal employees will receive back pay regardless of whether they are on the job.
The Supplemental Nutrition Assistance Program (food stamps) will resume its normal payment cycle after weeks of uncertainty in which states were forced to delay and ration benefits.But it won’t happen immediately, either: States say it will take up to a week for them to update beneficiary files and top up debit cards.With only two major card providers, bottlenecks can arise when every state seeks supplemental benefits at the same time.
The shutdown also resulted in economic data releases being canceled or delayed.What’s more, no new statistics on prices and employment were collected, leaving policymakers with a data gap that could skew forecasts for months.Analysts estimate that the shutdown will cost the economy $10 billion to $15 billion for each week it lasts.While back pay and suspended federal spending can be reversed, economists say some of the costs of this record shutdown will never be recouped.
