Government shutdowns occur when Congress fails to pass spending bills and the president does not sign a stop-gap measure. They have become a recurring hostage-taking mechanism in American fiscal politics.
The 21-day shutdown of 1995-96 was long the benchmark. Republicans, led by Newt Gingrich, produced a spending bill with deep cuts to social-welfare programmes that were anathema to President Bill Clinton, who refused to sign it. Late-night negotiations eventually yielded a compromise. Bob Dole, the Republican Senate leader, said: "We ought to end this. It has gotten to the point where it is a little ridiculous."
The shutdown that began on October 1st 2025 became America's second-longest on record on October 22nd, overtaking the 1995-96 episode. House Republicans, led by Speaker Mike Johnson, had not been in session since mid-September. Johnson said his party had done its job by passing a stop-gap bill keeping spending at current levels. Democrats rejected it 12 times in the Senate, demanding an extension to health-care subsidies due to expire at the end of the year.
Donald Trump engaged in budgetary chicanery to minimise the pain: the Department of War repurposed around $8bn to pay 1.3m members of the armed forces, some ICE and FBI agents continued to receive pay cheques, and national parks were kept open. The administration froze or cancelled around $28bn reserved for projects primarily in Democrat-run areas. Russell Vought, director of the Office of Management and Budget, used the shutdown to fire 4,100 federal workers and planned to slash at least 10,000 government jobs overall.
Oxford Economics reckoned that between 0.1 and 0.2 percentage points could be trimmed from annual GDP for each week the shutdown lasted. Funding for SNAP, which provides tens of millions of people with food aid, was set to run out in several states by November 1st.
John Thune, the Republican Senate leader, offered to hold a vote on health-care subsidies, but only after Democrats reopened the government. Few Democrats trusted Republicans to keep their word, given Trump's repeated moves to rescind congressionally appropriated funds.
The shutdown became the longest in American history, lasting a record 43 days. Seven Democratic senators and Angus King, an independent from Maine who led negotiations, broke ranks to side with Republicans on a short-term funding bill. The stopgap, signed by Trump on November 12th 2025, kept the government open until January 30th 2026, required agencies to rehire laid-off workers and guarantee back-pay, but did not include Democrats' main demand: an extension of health-care tax credits expiring at the end of the year.
The shutdown revealed the fragility of America's economic-data infrastructure. Bureau of Labour Statistics releases ceased entirely for the final month. Jerome Powell, chair of the Federal Reserve, compared policymaking without official data to "driving in the fog". Private-sector alternatives proved poor substitutes: initial releases of ADP and BLS data are essentially uncorrelated for monthly changes, and the statistical models underlying private-sector estimates are themselves trained on and benchmarked to official releases.
If you can count your money, you don't have a billion dollars.