What happens if the US government shuts down?

• VICTORIA CRAW and AAP
• news.com.au
• October 01, 2013 6:52PM

The US government is on the verge of a shutdown in a battle over Obamacare. Picture: AFP, Brendan Smialowski

FOR the first time in nearly two decades, the US government will shut down after Republicans and Democrats failed to reach an agreement over how to fund the country.

The White House budget office will notify federal agencies to cancel all non-essential services, after Congress failed to approve short-term funding measures before the midnight deadline.
It means the jobs of around 800,000 workers will be "furloughed" - a temporary leave of absence due to special circumstances - while international icons like the Statue of Liberty, Grand Canyon and Smithsonian Institution will close their doors to the public.
President Obama has told members of the military he will work to get Congress to re-open the government as soon as possible, as the "shutdown will have a very real economic impact on real people, right away."
So how did it come to this?
The US is in this situation because of a seemingly intractable deadlock over policy.
The Democrat-led Senate and Republican led-House have clashed over President Barack Obama's landmark healthcare bill, known as Obamacare. Republicans will only agree to approve a temporary spending bill in exchange for concessions on the healthcare law, which they view as wasteful and oppressive as it requires most Americans to have health insurance.
However despite two votes late on Monday evening US time, they failed to reach a resolution and federal agencies have been notified they should implement plans for a shut down.
It's the first time this has happened in 17 years, forcing about 800,000 people off the job and rattling financial markets around the world.

President Barack Obama said a shutdown would throw a wrench into the gears of US economy. Picture: AP Photo, Pablo Martinez Monsivais

How did it get this bad?
In the US, the legislative part of government (as opposed to the President) controls the purse strings. Technically, Congress should have passed a budget to fund the government for the next year on September 30, but recently this has been done in a series of short-term budgets known as "continuing resolutions" which are increasingly used as points of negotiation as the political scene becomes more polarised.
Both sides used the deadline to get their point across - even though parts of the Obamacare plan will be implemented on Tuesday whether the government closes or not.

Senate Majority Leader Harry Reid has indicated the U.S. Senate will not consider the legislation as passed by the House. Picture: Win McNamee, Getty Images.

What does it mean?
The shutdown means all "non-essential staff" - about 800,000 of the total 2.1 million-strong federal workforce - will stay home in a temporary leave of abscence known as a 'furlough.'
Here's how it would affect certain sectors:
• The White House and Congress: Facilities will remain open, although both are likely to lose some staff. Some US lawmakers, like Congresswoman Tulsi Gabbard of Hawaii, have pledged to return their salaries to the Treasury or donate them to charity.
• Museums and Parks: Smithsonian museums and all 368 sites in the National Park Service system will close.
• National icons: Major national parks like Yellowstone, the Statue of Liberty, the Grand Canyon and Philadelphia's Independence National Historical Park, home of Independence Hall and the Liberty Bell, will be off limits.
Plenty of other services will be affected such as clinical research trials, some pension payments, airline complaints, food safety inspections, mortgage processing, even weddings and the Puppy Press Conference will be called off, the Atlantic reports.

What happened last time?
Despite the turmoil, it's not the first time this has happened.
The government shut down for 21 days under President Bill Clinton in mid-December 1995, after he faced off with the Republican-controlled Congress who wanted to limit the growth of Medicare.
The shutdown took the public by surprise and suspended all non-essential services. Patients were not accepted into clinical research trials, calls to disease hotlines went unanswered and there were delays processing firearms licenses and child support cases. Washington was the focus of embarrassment as it stopped garbage collections. Now, Mayor Vincent Gray says he will declare all city employees "essential personnel'' in event of a shutdown, and use a contingency cash reserve fund to pay wages.
Nearly 400 national parks were closed, losing seven million visitors and plenty of revenue for local communities. There were also two million fewer people visiting national monuments and 20,000-30,000 visa applications went unprocessed each day. Federal contractors lost about $18 billion in contract deals and veteran services were also curtailed.

Attractions like the Statue of Liberty would remain closed. Picture: Spencer Platt, Getty Images.

Who else does it affect?
The stock market dropped amid news of the shutdown, though analysts suggested significant damage to the national economy was unlikely unless it lasted more than a few days.
Investors are also keeping themselves braced for an even bigger meltdown on October 17, when the government will face its deadline on the national debt ceiling.
Events in the US are crucial because they are the bedrock that nearly every other investment is built upon, largely due to the assumption that the nation will always pay its debts.
"The concern is government has become so polarised that if it cannot pass (a budget), there's a greater chance that the debt ceiling battle will go to the brink or possibly lead to a default," said Alec Young, global equity strategist with Standard & Poor's Capital IQ.
The last time the debt ceiling had to be negotiated in 2011, Standard & Poor's took the unprecedented step of downgrading the US credit rating.

The brinkmanship has thrown markets into turmoil. Picture: Spencer Platt, Getty Images.

What happens next?
President Obama has addressed the military to tell them he will work to reopen the government as soon as possible.
In a three-minute video in which there was no mention of Republicans, Obama said Congress has not fulfilled its repsonsiblity.
"It has failed to pass a budget and, as a result, much of our government must now shut down until Congress funds it again," he said.
House Speaker John Boehner, R-Ohio, responded: "The American people don't want a shutdown and neither do I," he said. Yet, he added, the new health care law "is having a devastating impact. ... Something has to be done."