Shutdown explained: Who works, who doesn’t and how much it costs as October 1 deadline nears
With the October 1, 2025 fiscal-year deadline approaching, the threat of a government shutdown grows — this explainer outlines what a shutdown means, which federal workers are affected, the economic costs, and the policy standoff driving the impasse.
- What a shutdown is: Failure to pass appropriations or a continuing resolution halts discretionary funding and most agency activities.
- Who works: excepted (essential) employees continue duties, often without immediate pay; non-excepted employees are furloughed.
- Cost and stakes: Shutdowns cause lost productivity, emergency back pay and broader economic harm; past shutdowns cost the U.S. economy billions. See the Holland & Knight advisory for analysis.
What is a government shutdown?
A shutdown occurs when Congress fails to enact either the 12 regular appropriations bills or a short-term continuing resolution (CR) before the fiscal year begins on October 1. Without enacted funding, most discretionary programs stop paying workers and suspend many services. The legal and practical details are explained in government advisory summaries and legal analyses; for background see the Holland & Knight advisory.
Who works, who doesn’t: federal employees affected
Federal workers are classified into two broad groups during a lapse in appropriations:
- Essential (excepted) employees: These employees continue to report for duty because their roles protect life, safety or national security — for example, air traffic controllers, many law enforcement officers, and VA personnel needed for critical care. They typically work without pay until Congress provides funding. (See the Holland & Knight advisory.)
- Non-essential (non-excepted) employees: These workers are furloughed, do not perform work, and do not receive pay during the shutdown. This category can include administrative staff, federal lab researchers, some regulatory personnel and others. (Source: Holland & Knight advisory.)
Commonly affected services include national park operations, passport processing, many regulatory actions, federal research projects, and parts of grant and contract administration. Programs funded by mandatory spending — such as Social Security, Medicare and Medicaid — continue paying benefits, though administrative slowdowns can still affect access and services.
How much it costs
Shutdowns impose both direct and indirect costs:
- Direct costs: Furloughed employees are usually paid retroactively once funding is restored, which covers lost wages but does not compensate for lost productivity. Legal and economic analyses note the 2018–2019 partial shutdown cost the economy roughly $11 billion, with several billion in permanent losses. (Source: Holland & Knight advisory.)
- Indirect costs: Businesses relying on federal contracts and permits can face delayed payments and stalled projects; tourism and services near federal sites lose revenue; delays in grant funding and regulatory approvals can slow construction, research and innovation.
Why lawmakers are deadlocked: Obamacare subsidies and the clean CR fight
The current standoff centers on near-term funding and longer-term policy priorities, especially the future of enhanced premium tax credits under the Affordable Care Act.
- Democrats’ demand: Senate Democrats have pushed a continuing resolution that would include a permanent extension of enhanced Obamacare premium tax credits (scheduled to expire December 31, 2025). Their Senate CR (S.2882) would fund the government into late October and lock in those subsidies. Democrats argue ending the subsidies would sharply raise premiums for many Americans. (Source: Holland & Knight advisory.)
- Republicans’ position: House Republicans advanced a clean CR (H.R.5371) to fund the government through November 21, 2025, without a permanent extension of the enhanced subsidies. Some Republican proposals include targeted, temporary health flexibilities such as telehealth extensions and delayed Medicaid cuts. Republicans warn attaching long-term policy changes to short-term spending bills risks fiscal overreach. (Source: Holland & Knight advisory.)
Recent votes: Both the House-passed Republican CR and the Senate Democrat CR failed to become law after votes on September 19, 2025, leaving the path to October 1 unresolved and the risk of a government shutdown high. (Source: Holland & Knight advisory.)
What happens next if no deal is reached
If appropriations or a CR are not enacted by October 1, federal agencies will begin implementing shutdown procedures. Agencies will identify excepted employees required to continue working; non-excepted employees will be furloughed and ordered not to work. Some services will stop immediately while others operate on reduced staffing. Once funding returns, Congress generally authorizes back pay for furloughed workers, but businesses and communities may suffer lasting harm from interrupted contracts and delayed projects. (Source: Holland & Knight advisory.)
Political and fiscal implications
Conservative readers concerned about fiscal responsibility and stable governance should weigh two central questions:
- Should short-term funding measures be used to enact long-term policy changes? Republicans argue no, warning that attaching significant policy riders — like a permanent expansion of Obamacare subsidies — to short-term CRs undermines accountability and increases long-term costs.
- How will the costs be managed? Past shutdowns increased federal bills through back pay and harmed private-sector partners; voters ultimately bear the cost through higher deficits or lost economic activity.
Implications for Walla Walla, Washington
Local impacts in the Walla Walla region could be significant across tourism, agriculture, federal employees and veterans:
- Economic impact: Businesses serving federal employees, seasonal workers and tourists may see reduced revenue. The Whitman Mission National Historic Site and other federal-managed sites could limit operations or close, reducing visitors and hurting hotels, restaurants, wineries and tour services. (Source: Holland & Knight advisory.)
- Agriculture and processing: USDA field offices and programs that support farm loans, disaster payments or inspections may slow, creating cash-flow stress for growers and packers; federal contract delays ripple to local suppliers and service providers.
- Federal employees and veterans: Local federal employees and contractors could be furloughed or ordered to work without pay, straining household budgets. Veterans may see some VA administrative services delayed, though critical care is typically maintained.
- Health care and subsidies: If Congress does not extend enhanced Obamacare subsidies, many Washington residents could face higher premiums next year. Local hospitals and clinics may see changes in payer mix and collections. (Source: Holland & Knight advisory.)
- Social services and grants: State and local partners relying on federal grant timing could face delays; nonprofits may need to cut services or staff temporarily.
What local leaders and residents can do now
- Stay informed: Monitor local news, county notices and federal agency announcements about service changes and openings. Expect passport processing and some permitting to slow or pause if a shutdown begins. (Source: Holland & Knight advisory.)
- Plan financially: Households with federal employees or contractors should prepare for potential lost income; businesses should assess exposure to federal contracts, grants or tourism declines.
- Engage representatives: Constituents can press members of Congress to find pragmatic solutions that protect local economies while avoiding long-term policy changes tucked into short-term funding measures.
Reporting note
This article draws on legal and policy analysis of the potential shutdown and funding proposals. For background and additional details, see the Holland & Knight advisory.
“A shutdown halts discretionary programs and forces agencies to prioritize essential services; the broader economic damage can persist long after funding is restored.”
