Federal Government Shutdown: Here’s What Services And Payments Could Be Impacted

The United States is bracing for a possible federal government shutdown that could commence at 12:01 a.m. on Saturday, December 21, as current federal funding is set to expire. This development raises concerns about how essential services and federal payments may be affected, especially with the holiday season fast approaching.

Reason for the Impending Shutdown

The potential shutdown is the result of a contentious debate over a proposed spending bill intended to extend funding through March 14. However, House Speaker Mike Johnson withdrew support for the measure following objections from some Republican leaders, including President-elect Donald Trump. The primary point of contention was the inclusion of billions of dollars in additional spending.

Tesla CEO Elon Musk, a prominent financial backer of Trump and other Republican candidates during the November election, also criticized the bill. Describing it as “terrible,” Musk celebrated its rejection on the social media platform X, declaring, “The voice of the people has triumphed!”

What Happens in a Federal Government Shutdown?

If Congress fails to authorize new funding, most federal agencies must suspend operations, with some exceptions for activities essential to protecting life and property. Each agency determines which employees remain on duty, leading to significant disruption across various government services.

David Wessel, a senior fellow at the Brookings Institution, noted in a blog post, “Shutdowns can be disruptive, leading to delays in processing applications for passports, small business loans, or government benefits.”

Reasons of Federal Government Shutdown

Government workers deemed essential, such as air traffic controllers and law enforcement personnel, will continue to work, but without pay. Other federal employees will be furloughed. Retroactive paychecks are issued once a shutdown concludes, but the financial strain on workers during the interim can be significant.

A similar situation occurred during the shutdown that began on December 22, 2018, and lasted over 30 days. Many workers faced financial hardship, turning to food banks and other support services to make ends meet.

Impact on Social Security and Medicare

Social Security payments to the nation’s 67 million recipients will continue without disruption, as the program operates under laws that don’t require annual congressional approval. Medicare services will also remain active, ensuring seniors retain access to medications and healthcare.

However, the Social Security Administration’s administrative budget relies on discretionary funding. This could lead to delays in benefit verifications and the processing of new benefit applications, according to AARP.

Effect on Air Travel and the TSA

Travelers can expect potential delays at airports, as Transportation Security Administration (TSA) agents and air traffic controllers are classified as essential workers and must work without pay during a shutdown.

The Department of Homeland Security previously warned that shutdowns could result in “significant delays and longer wait times for travelers at airports across the country,” citing past shutdown experiences as precedent.

Impact on the Military

Active-duty military personnel and federal law enforcement agents will continue working, but like other essential government workers, they will not be paid until Congress approves a new spending measure. Civilian employees working for the U.S. Department of Defense will be furloughed.

According to the Military Times, the Department of Defense and Veterans Affairs are preparing to notify workers of potential shutdown protocols. If the shutdown extends into January, the first military paychecks of 2025—which are set to reflect a 4.5% pay increase—could be delayed.

What Closes During a Shutdown?

Many public services would be suspended or delayed. According to the Committee for a Responsible Federal Budget, environmental inspections and food safety checks conducted by the Environmental Protection Agency (EPA) and the U.S. Food and Drug Administration (FDA) would be affected. National parks would likely close, and some services offered by the National Institutes of Health (NIH) could also be halted.

The IRS may face furloughs, which could affect its ability to process tax returns. While quarterly estimated tax payments due on January 15 must still be paid, the start of the 2025 tax filing season—typically in late January—could face disruptions.

How Long Could a Government Shutdown Last?

The potential length of the shutdown remains uncertain. Analysts at Goldman Sachs suggested in a December 18 research note that a “protracted shutdown looks unlikely” but acknowledged that the possibility of a shutdown had increased.

A spending measure could still pass before the December 21 deadline if Republicans can amend the bill to address Trump’s objections. According to Goldman’s analysts, “Trump’s opposition was unrelated to the main components—he stated support for the spending extension, and the disaster and agricultural aid—so it is possible that a revised package could still pass before” the deadline.

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