US Congress has until 3rd (30.Set), end of fiscal year, to approve the budget and avoid stopping
The US government may face a new “shutdown”If the Congress does not reach an agreement on the budget until 3rd (30.Set.2025), the last day of the fiscal year. The term refers to the partial stoppage of government activities due to lack of resources, which reaches from the operation of federal agencies to the payment of employees considered considered “Not essential.”
The origin of the mechanism is in the law of 1884, which prohibits federal agencies from spending above the authorized without the approval of the congress. Annually, parliamentarians need to pass 12 appropriation laws that finance public spending. If there is no consensus, sectors without approved funds go into stoppage.
The risk is real and was recognized by the President (Republican Party) himself, who stated that a government stoppage “It can be, yes” Probable in the face of a stalemate with the Democrats.
“The market itself is betting on a shutdown in the US”, said Daniela Freddo, professor at the Department of Economics at UnB (University of Brasilia), Poder360.
The House has already approved an extension of spending by November, but in the Senate, the Republican majority needs democratic votes to pass the law. The problem is that the sides disagree with how to structure the budget.
Republicans, pressured by the most conservative wing of the party, want deeper cuts in social programs and reduction of federal spending. They argue that the government deficit is in the unsustainable trajectory. This is that of the Republican Bill (PDF – 23 MB).
Democrats defend the maintenance of investments in health, education and infrastructure, stating that the cuts proposed by republicans
Without, none of the proposals advance. “While negotiations are still, the White House ordered agencies to prepare for mass layoffs, going beyond the temporary licenses of previous shutdowns,” said Freddo.
Despite the tension, there are still alternatives. One is to approve the full budget package for the 2026 fiscal year, ranging from October 2025 to September 2026. Another is to approve a temporary measure known as continuing resolutionwhich maintains current spending levels for a few weeks or months until a definitive agreement is reached.
If there is stoppage, the effects will be felt quickly in the US.
“The consequences include temporary reduction in GDP growth (Gross Domestic Product), delayed public services and regulatory processes, non -essential servers on unpaid license or even definitive cuts, suspension or postponement of government contracts and expansion of political risk perception”, said the economist.
In financial markets, the stoppage tends to increase the volatility of actions, interest and exchange rates. It also causes search for refuge assets, such as treasuries and gold, and penalizes sectors dependent on government contracts or approvals.
The impact is often limited if the stoppage is short, but the threat of mass layoffs increases potential gravity.
The tax calendar helps explain why these clashes are repeated. Unlike the civil calendar, which runs from January to December, US fiscal year ends on September 30.
According to Freddo, this “Creates a fixed deadline that concentrates negotiations and increases pressure for temporary solutions, such as the funding extension proposal until November 21”.
Although markets usually recover after an agreement, “The climb of rhetoric (such as the exchange of accusations between Trump and democratic leaders and the explicit threat of mass layoffs) reinforces the perception of instability and worries investors for signaling that US governability is increasingly subject to party confrontations,”, concluded.
This report was produced by Journalism intern Nathallie Lopes under the supervision of editor Matheus Collaço.
