US Shutdown: what happens now

According to the Congressional Budget Office, up to 750,000 federal employees could be furloughed. Meanwhile, the administration has maintained fast lanes for trade and immigration, while members of Congress continue to receive their salaries.

The federal revenue agency, thanks to multi-year funds from 2022, remains operational in the first few days, drawing on its 'piggy bank'. Beyond the first week, however, the scenario could become uncertain. In the national parks, roads and trails remain accessible, while buildings and museums remain closed: a situation that in the past had led to rubbish accumulation, out-of-use toilets and environmental damage.

Federal justice freezes many civil cases, while public statistics slow down. Without the Bureau of Labor Statistics and other bureaus at full capacity, the 'data blackout' may postpone the jobs report and complicate the Federal Reserve's readings. Markets, meanwhile, watch calm but wary:the problem is not the few days' halt, but the absence of official indicators that fuels volatility and uncertainty.

At the same time, the latest Automatic Data Processing report indicated a loss of 32,000 jobs in the private sector in September, reinforcing the image of a cooling employment market.The postponement of official employment data from the Federal Bureau of Statistics could exacerbate the Fed's uncertainty in interest rate decisions, generating volatility in the bond and currency sectors.

Institutional communication, meanwhile, bends to the clash: internal emails and messages blaming the Democrats, breaking the practice of neutrality. At the State Department, the Office of Management and Budget (OMB) and the Office of Personnel Management (OPM) are circulating instructions for an 'orderly shutdown', i.e. the list of services to be suspended and those to be maintained to protect 'life and property'. In the background, the controversy over impoundment (withholding funds already appropriated by Congress), used by the executive branch and criticised as overriding the spending power of the legislature.

From the administrative front, OMB Director Russ Vought froze $18 billion earmarked for New York City infrastructure projects: for many, a political move against Schumer and Congressional Dem minority leader Hakeem Jeffries.

Outside Washington, meanwhile, states and cities are running for cover. Maryland, with thousands of federal workers, is activating plans with utilities and banks to prevent evictions and insolvencies, while New York warns of risks to construction and tourism. Programs such as WIC (nutrition for women and children) have limited funds and some states are hesitant to cover expenses not guaranteed by federal reimbursement.

But the battle also enters election campaigns: in Virginia Beach, Democrat Michael Feggans launched a TV ad denouncing the damage of the shutdown for federal workers and contractors, promising to defend them against evictions and insolvencies.

On the political level, the Democrats put all their eggs in the health care basket: 'We defend premiums and coverage, they defend nothing'. The Republicans retort that 'policies are negotiated in open government'.

Every day of gridlock impacts the real economy and administrative operations. According to an internal White House analysis, if the standoff lasts longer than two weeks,the cost to GDP could reach about $15 billion per week, with an estimated erosion of 0.2 points of growth in the quarter. The Treasury Department also fears that bond market volatility could rise sharply after 10 October, when several key macroeconomic indicators - including the monthly employment report - are likely to go unpublished, depriving the Federal Reserve of crucial monetary policy benchmarks.

At the same time, the social and economic consequences are likely to multiply. Thousands of private sector workers on contracts with government agencies could lose their jobs by the end of the month. The construction and infrastructure sector, which is largely dependent on public funds, is already reporting the first construction sites suspended, while trade associations warn that an extension beyond three weeks could put tens of thousands of suppliers and contractors in trouble.The first effects on the domestic economy could be felt as early as mid-October, when many federal employee households will run out of savings and credit lines, affecting consumption and domestic demand.

But it is the health front, epicentre of the political confrontation, that is destined to become one of the most explosive issues. The Department of Health has suspended 41% of its staff, while the Centres for Disease Control and Prevention (CDC) are operating at severely reduced capacity, compromising epidemiological surveillance activities and seasonal vaccination programmes. The Food and Drug Administration has announced that it will not accept new applications for approval of drugs and devices, generating delays in regulatory processes, while the National Institutes of Health will suspend the start of new clinical trials and only continue activities considered urgent. If Congress does not renew the ACA subsidies - the Affordable Care Act's financial aid to make health insurance more affordable for those on low and middle incomes - by December,insurance premiums could rise by up to 114%, leaving millions of Americans without health coverage or forced to choose between medical care and other essential expenses.

Even seemingly peripheral services may begin to show deep cracks. National parks remain open but unmaintained, with the risk of environmental degradation and accidents; at ports and customs control centres, considered essential services, operations continue but with possible local slowdowns, while at airports the absence of some security and control staff could turn into systemic delays as the weeks go by.

On the political level, there are mainly three scenarios on the table: the first is the approval of a clean continuing resolution with bipartisan defections, which would allow the temporary reopening and move the content negotiations to November; the second is a minimal compromise package centred on the extension of ACA subsidies for a few months, leaving the most divisive issues open; the third, and most risky, is a extension of the shutdown beyond mid-October. A scenario, the latter, that could trigger pressure from markets, contractors and public opinion on the leadership of the two parties.