The US Government has been shut down for 20 days. This is not the first government shutdown; I doubt it will be the last.
A shutdown happens when the US government can’t authorise spending. The Appropriations Clause in Article I, Section 9 of the US Constitution mandates that only Congress can draw money from the Treasury.
It states, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law”
That said, what the Democrats are doing is shutting down the government because they disagree with a passed law.
Usually, when a policy of a party is before Congress, it’s voted on by both houses and then signed by the President. Both parties employ the threat of a filibuster, which essentially is a threat to speak on the floor for an extended period, causing time to run out. In the Senate, to break the threat of a filibuster, you need 60 votes. Thus, Obamacare was passed with 60 votes.
What the Democratic members in the Senate are doing is shutting down the government to stop the implementation of a bill they failed to stop in Congress. The H.R.1 – One Big Beautiful Bill Act (actual name) was passed by both the House and the Senate in July. The Democrats, as is their legislative right and duty, oppose many parts of the OBBB. Still, they have refused to fund government spending until specific provisions of the OBBB are rescinded and their priorities are added.
Specifically, the Democrats in Congress want to extend the expiring enhanced health care subsidies as a condition for reopening the government. The Republicans say, “Open the government, then we can talk”.
This is what’s different about this shutdown: the Democrat Senators are refusing to vote on any business of the US government, even to pay the military, over disagreement with a passed bill.
The Democrats say their position is valid because the Republicans passed the OBBB with no Democrat input. Yes, that is a fair point, but the Affordable Care Act (Obamacare) was passed with no Republican input or votes as well.
If this tactic works, then the US Congress’s power to be the final appropriator of funding will be lost, as the opposition party will shut down the government over passed bills it does not like. How can a business plan, knowing a signed bill is not safe from forced review outside the regular practice of lobbying and legislation?
The democracy practised in America is a key drag on its economy. Long-term planning cannot happen with tariff threats and shutdowns. The political risks have kept the US 10 years at near 4%, which is considered high. A shutdown also means key economic data on employment and inflation cannot be reported; essentially, the Federal Reserve, which relies on these data to adjust rates, is flying blind, which is not suitable for the global economy and the Naira. Every drop in US rates is net positive for emerging market currencies. The Federal Reserve was widely expected to drop rates further after its next meeting scheduled for October 28th. An avoidable pause is that the rate reduction program is not helpful.
The nuclear option, however, is for the Republicans to bypass the Veto rule, fund he government with 50 votes and move on. This means the US Senate will run on the same rules as the House, making compromises and across-the-aisle deal-making very rare.
Overall, the largest economy being closed does not inspire confidence; no wonder we see gold prices soaring and the US dollar weakening.
