A U.S. federal government shutdown creates a number of direct and indirect consequences that impact U.S. companies, individuals and virtually every aspect of the U.S. economy. Although the federal government has experienced previous lapses in funding that have led to shutdowns of all or part of the federal government, the current funding impasse and impending shutdown raise a number of unique and unprecedented questions for government workers, government contractors and businesses, and the public at large.
A U.S. federal government shutdown can have serious consequences because of the size of federal spending and its impact on the U.S. economy. The U.S. government spent $6.27 trillion dollars in fiscal year 2022 which amounted to approximately 25% of total gross domestic product. The federal government funds over 2,200 federal assistance programs for the public. There are over 2.2 million federal employees who will be directly impacted in some way by a federal government shutdown with the majority facing a furlough of an undetermined length. There are over 11 million U.S. federal government contracts signed every year and they may be impacted by a shutdown. Finally, the federal government spends approximately $1.2 trillion dollars every year, or about 19% of all federal spending, on programs that fund or are related to the states.
The purpose of this Client Alert is to explain the consequences of a government shutdown in general, why this one may be different, and to also offer insights to the regulated industries, government contractors and others on what to expect this time around. Our team is ready and available to help advise companies through this shutdown process.