US Federal Shutdown 2025 .. A Clash of Wills Between Trump and Democrats
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Abstract
This report analyzes the dimensions of the current US federal shutdown as a multi-level crisis that touches on the core relationship between the executive and legislative branches and deeply impacts the national economy and the international role of the United States. The current shutdown has gone beyond being a financial failure to become a tool of political and structural conflict between the Trump administration and the Democratic bloc in Congress over the limits of spending power and the direction of social policy.
Economically, the weekly losses are estimated at 0.1–0.2 percentage points of GDP, with direct impacts on employment and consumption, and indirect repercussions on market confidence and the flow of statistical data upon which the Federal Reserve relies in its decisions. The disruption of federal programs also causes varying disruptions across states and deepens social inequality.
Legalally, the administration faces strict restrictions under the Anti-Deficit Fiscal Act, making threats to detach or redirect funding vulnerable to judicial and congressional challenges.
Internationally, the shutdown weakens the United States' institutional image and affects the timing and credibility of foreign aid commitments. In conclusion, the report highlights that the crisis represents a test for the American system itself, underscoring the need for permanent reforms that ensure stable federal funding and protect democratic governance from the pitfalls of partisanship.
Introduction
In a precedent reminiscent of major financial and political crises in Washington, the US federal government has once again entered a partial shutdown, the longest and most complex under President Donald Trump, after Congress failed to pass a temporary funding bill to ensure continued government spending. This shutdown, which began in early October 2025, is no longer merely a technical dispute over figures and the budget; it has transformed into an open political confrontation between the White House, which seeks to impose its agenda on immigration and social welfare, and the Democratic bloc, which rejects what it describes as "financial extortion" at the expense of the most vulnerable segments of American society.
While major government institutions are shut down and hundreds of thousands of employees are furloughed, economic concerns are growing at home and abroad, amid warnings that a prolonged shutdown could weaken growth, undermine global confidence in the strength of the US administration, and raise questions about the limits of executive power and the role of Congress in controlling public spending. In this context, this analytical report offers a comprehensive reading of the current federal shutdown from a political, economic, and legal perspective, drawing on the latest developments and positions inside and outside Washington to understand how the funding dispute has become a profound test for the future of American governance itself.
First: Dimensions of the Political and Authoritarian Situation
The Federal Shutdown: A Manifestation of an Institutional Clash Between the Two Branches
The current federal shutdown in the United States represents a sharp manifestation of an accumulating strategic clash between the executive and legislative branches, centered on the limits of presidential powers versus Congress's authority to control the general budget and direct federal spending. Since the beginning of the crisis, the administration of President Donald Trump has positioned itself on the offensive, driven by a view that views the shutdown as a political pressure tool that can be used to reshape the state's priorities, rather than merely the result of a procedural dispute over financial appropriations.
Politicizing Government Funding: The White House Strategy
From this perspective, the White House has adopted an approach based on politicizing government funding and using it as leverage to impose structural changes to immigration policies, social welfare, and local spending.
This is evident in Trump's recent presidential address, in which he hinted at the possibility of canceling projects in Democratic-majority states or laying off federal employees permanently, rather than temporarily. This precedent heralds the expansion of the concept of a "shutdown" from a negotiating tool to a means of downsizing the federal administrative apparatus itself. This approach reflects a qualitative shift in the tools of governance. Trump seeks to establish a "strong president" model that governs the country with a negotiating logic more reminiscent of the business world, taking advantage of the deep partisan divide and popular polarization that makes the cost of political confrontation less than the cost of retreat.
The Democrats' Dilemma: Between Pressure from the Base and Concerns of Public Opinion
On the other hand, the Democratic Party faces a double dilemma:
- On the one hand, it faces internal pressure from its progressive base, which rejects any concessions that would undermine the gains of the Obamacare program and social support for low-income groups.
- On the other hand, its leaders in the Senate and the House of Representatives realize that a prolonged shutdown could backfire on them in public opinion if their position is portrayed as a disruption of national institutions.
However, the Democrats, led by Senator Chuck Schumer, realize that a rapid retreat this time could be considered a strategic setback, given the criticism they faced during the 2018-2019 shutdown when they accepted a temporary settlement without tangible gains. Therefore, they are now clinging to their position as the last line of defense for the liberal social policies that shape the party's identity within the United States.
The Balance of Power in Congress: Strategic Obstruction vs. Popular Pressure
At the level of the balance of power within Congress, another complicating factor emerges:
Republicans hold a slim majority in the House of Representatives, but they lack a decisive majority in the Senate that would allow passage of spending legislation without Democratic support.
This delicate balance gives Democrats the ability to strategically obstruct (veto), making them an indispensable party in any settlement. Meanwhile, Trump is relying on popular and media pressure to turn the crisis into a "president vs. Congress" conflict, a framework that serves him politically to mobilize his electoral base as the midterm elections approach.
Blocked Negotiation Channels and Prospects for a Settlement
A close look at the official speeches and press releases issued by both sides indicates that the prospects for a quick resolution to the crisis remain extremely limited. The absence of effective negotiation channels, and each side's continued mobilization of its constituency through rhetoric of defiance and accountability, reflect an implicit understanding among both leaderships that the political cost of a shutdown is less than the cost of concessions at this time.
However, observers warn that a shift in public sentiment or worsening economic damage could shift the balance of power in the coming weeks, especially if economic and financial indicators (such as a decline in the stock market or delayed payrolls for federal employees) begin to pressure public opinion in the opposite direction.
Overall, the current federal shutdown reflects a shift in the nature of American authoritarian practices from a model of institutional cooperation between the two branches to a model of conflict through budgetary tools. This redefines the relationship between the White House and Congress as a space for contestation over political legitimacy, rather than a partnership in governing the state. It thus constitutes a true test of the American system's ability to absorb crises without compromising its constitutional foundations or economic stability.
Second: The Legal Framework for the Federal Shutdown: Executive Powers and Legislative Restrictions
The Legal Basis for the Shutdown: Implementing the Doctrine of "No Spending Without Appropriation"
A US government shutdown is essentially based on a well-established legal principle known as the "No Spending Without Appropriation" doctrine, enshrined in the Antideficiency Act of 1884 and subsequently amended in the 20th century.
This law prohibits any federal agency or department from committing funds or spending from the public treasury without explicit authorization from Congress through the annual appropriations bill. Under this doctrine, funding for "non-essential" government activities automatically ceases once the previous funding period expires without the passage of a new budget or continuing resolution.
This framework is not merely an accounting procedure; it represents a practical embodiment of the separation of powers principle, which gives Congress the upper hand in controlling public spending and prevents the executive branch from overriding the legislature's will in using public funds for political or partisan purposes.
Hence, the shutdown is not a “political decision” as much as it is a legally binding consequence of the funding cessation, with only specific powers reserved for security, defense, and public health agencies to continue their missions as “necessary to protect life and property.”
The Limits of Executive Power During a Shutdown: Between Management and Disruption
During shutdowns, the executive branch is given limited latitude to manage existing resources only within the framework of what is known as “continued essential activities.” However, it does not legally have the right to divert funds or create alternative funding sources without congressional approval.
However, the Trump administration appears willing to test these limits by discussing alternative executive tools, such as redirecting existing funds from other budget lines or freezing budgets allocated to states or local projects. These measures could directly conflict with Congress’s constitutional authority to “control the public purse.”
This strategy revives an old constitutional debate about the concept of “budgetary rescission,” or the president’s ability to cancel or suspend spending previously approved by Congress.
This debate was partially settled in the 1998 case of Clinton v. City of New York, when the Supreme Court ruled the "line-item veto" unconstitutional, holding that the president cannot modify spending decisions without new legislation.
Consequently, any use by the Trump administration of executive orders to redirect funds would face immediate challenges in federal courts and potentially lead to a constitutional crisis over the scope of executive power during a shutdown.
Employment Threats: The Legal Framework for Reduction in Force (RIF)
The Trump administration's announcement that it would terminate a number of federal employees during the shutdown—rather than lay them off temporarily—has sparked widespread legal controversy in Washington.
The Federal Civil Service Act and the Office of Personnel Management (OPM) Regulations govern what is known as a "reduction in force" (RIF), which requires a series of formal procedures, including:
• At least 60 days' advance notice.
• A clear structural justification linked to reorganization or a confirmed lack of funding.
• Guarantees for lower-level employees include the right to appeal to the Federal Merit System Protection Board (MSPB).
Any attempt to carry out immediate terminations based on the shutdown without going through these procedures constitutes a clear violation of legal and administrative standards.
Federal labor unions, such as the AFGE (American Federation of Government Employees), have already begun filing formal complaints and threatening lawsuits against any executive orders deemed to “circumvent administrative laws.”
If these threats are carried out, federal labor courts are expected to consider the case as a precedent that undermines public service protections and undermines the principle of professional impartiality in the civil service.
The Executive and Congressional Debate: A Structural Separation of Powers Crisis
The current shutdown represents more than a funding crisis; it is a test of the resilience of the American constitutional model, which is based on a delicate balance between the executive power of the president and the legislative power of Congress.
While the Constitution grants the president the authority to implement laws and manage federal agencies, Congress remains the sole holder of appropriations, making any presidential attempt to circumvent this arrangement a quasi-authoritarian act in the eyes of constitutional experts.
A number of researchers at the Brookings Institution and the Georgetown Law Center suggest that the Trump administration is seeking to redefine the concept of "expanded executive power," exploiting previous loopholes that allowed the use of executive orders in immigration or national defense matters.
However, if the White House pursues this path, it could open the door to an institutional constitutional dispute reminiscent of crises such as the Iran-Contra scandal of the 1980s or the "war powers" disputes between Congress and the presidency at the beginning of the 21st century.
In light of these facts, the current shutdown is likely to take a dual path:
• An internal administrative-legal path, centered around union lawsuits and appeals against any unjustified layoffs or restructuring decisions.
• An institutional constitutional path, in which the American judiciary's ability to impose legal limits on executive decisions of a political nature may once again be tested.
In either case, the continuation of the shutdown, coupled with the escalation of executive orders, will transform the crisis from a balancing act into a confrontation between the three constitutional branches (executive, legislative, and judicial), making the legal dimension one of the most sensitive and influential aspects of the crisis for the future of American political balance.
Third: Map of Losses Distribution Within the United States
Federal Administrative Shutdown: Partial Paralysis with Accumulating Humanitarian and Economic Impacts
As the federal shutdown enters its second week, the repercussions on the ground are beginning to crystallize into a widespread administrative shutdown. More than 800,000 federal employees have been placed on forced unpaid leave, while approximately 1.2 million other employees continue to work temporarily without pay in the security, air transportation, healthcare, and military sectors, according to updated estimates from the Office of Management and Budget (OMB).
This gap between work and wages is not merely a temporary financial burden; it is transforming into local consumer shocks that reduce demand in the service, housing, and retail sectors, especially in states that rely economically on a high concentration of government jobs, such as Virginia, Maryland, Washington, D.C., and New Mexico.
While previous shutdowns were customary to compensate employees for lost wages immediately after the government reopened, this time the presidential threat of permanent layoffs represents a paradigm shift in the nature of the crisis. Instead of temporary, recoverable losses, the impact becomes permanent, meaning a structural contraction in the public sector and a direct impact on unemployment rates and domestic consumption in the medium term.
Critical Social Programs: Between Temporary Funding and Structural Exposure
The impact of the shutdown extends beyond jobs to the core of America's social safety nets, which rely on a steady stream of federal funding.
A prominent example is the Women and Children's Supplemental Nutrition Program (WIC), which serves more than 6.5 million beneficiaries and relies on a limited reserve fund that covers only a few weeks of spending. As the shutdown continues, the U.S. Department of Agriculture (USDA) estimates that the program's resources could be exhausted by mid-October, forcing many states to temporarily fund it from their local budgets to avoid interrupting nutrition and healthcare services for mothers and children.
Other programs, such as the Low-Income Housing Assistance Program (HUD Program) and the Early Childhood Care Support Program (Head Start), face a similar fate. They rely on annual appropriations that cannot be disbursed without legislative funding, threatening to increase poverty rates and deepen social inequality gaps in low-income communities.
This exposure highlights the vulnerability of the federal social financing mechanism during times of political disruption and raises a fundamental question about the sustainability of a public services model that relies on annual appropriations rather than long-term structural funding.
The Contracting Sector and Government Spending: A Bottleneck in the Chain of Contracts and Projects
One of the sectors most affected by the shutdown is the federal contracting sector, which employs millions of workers in small and medium-sized businesses that work with government agencies.
With payments and new contracts halted, the National Federation of Independent Business (NFIB) estimates that nearly 30% of small businesses that work with the government are facing immediate liquidity problems, while large subcontractors have temporarily suspended operations pending the resumption of funding.
This disruption impacts supply chains and threatens to delay infrastructure, defense, and scientific research projects. Technical and consulting services contracts, the backbone of federal government support, are also threatened with long-term cuts, leading to a significant decline in investment in innovation and technology during the current fiscal year.
In industrial and military states such as Texas, Alabama, and Arizona, where factories and companies contract with the Department of Defense and transportation agencies, signs of temporary partial unemployment have begun to appear, while some companies have announced their intention to review their future contracts with the government to avoid the risk of similar disruptions.
Geographical Disparity in Impact: Affected States and Relatively Insulated States
The impact of the shutdown is geographically uneven.
While Washington, D.C., and Northern Virginia bear the brunt due to the high concentration of federal jobs, states in the South and Midwest (such as South Dakota and Wyoming) are experiencing a relatively limited impact due to their greater reliance on local agricultural or industrial activity rather than direct government spending.
However, this disparity does not obviate the fact that poor states or states with fragile social structures—such as Alabama, Mississippi, and New Mexico—face double the risk because their food and welfare programs represent a high percentage of GDP, making them more vulnerable to the interruption of federal transfers.
According to a preliminary analysis by Moody's Analytics, a continued shutdown of more than a month would result in total economic losses estimated at $6 billion to $8 billion per week in GDP, with unemployment rising by 0.2 to 0.3 percentage points nationally, and even more so in central government states.
Short-term social consequences: Rising inequality and deepening gaps
This distribution of losses makes the shutdown a factor in exacerbating social and spatial inequality in the United States. Employees with fixed wages and beneficiaries of support programs are the most affected, while the financial sector and large investors remain relatively safe in the short term. Urban Institute experts warn that continued closures could lead to a 1% increase in temporary poverty rates during the last quarter of 2025, an increase that will have cumulative effects over the following years.
The disruption of federally funded educational and research programs—especially at public universities—will also impact the nation's human capital and weaken American competitiveness in the medium term.
Ultimately, this complex landscape indicates that the current federal shutdown not only freezes state mechanisms but also serves as an accelerator of existing economic and social imbalances.
While the White House is attempting to exploit the crisis as a political bargaining chip, the actual results on the ground reveal an erosion in the federal government's ability to ensure the continuity of essential services amid political divisions, and the fragility of the American economic model in the face of domestic political turmoil.
Fourth: Disruption of Economic Data and Monetary Decision-Making
The Absence of Official Data: A Digital Darkness at the Heart of the American Economy
The current federal shutdown constitutes an unprecedented information crisis in the US economic structure, temporarily or completely disrupting the release of many official indicators that policymakers and global financial institutions rely on to assess economic performance.
Statistical and labor bureaus, including the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA), have announced the postponement of the publication of vital reports such as the monthly Jobs Report, inflation and price indicators, and quarterly GDP calculations due to the suspension of operational funding.
This interruption in the flow of data creates what can be called a "statistical void," paralyzing economic monitoring tools and preventing financial institutions from accurately updating their forecasts.
In an economy that relies on "real-time" data to inform monetary and investment decisions, the absence of official figures for weeks is tantamount to losing track of direction in a moment of turmoil.
A direct reflection on the Federal Reserve: Monetary Policy in a Blind Spot
The Federal Reserve (Fed) is currently dealing with one of the most uncertain periods in its assessment of the economic situation since the COVID-19 pandemic.
In the absence of reliable data on inflation, unemployment, and household spending, monetary policymakers are forced to rely on unofficial alternative indicators such as private sector data or nowcasting models produced by market analysis firms. However, as analysts at the Federal Reserve Bank of St. Louis emphasize, these models carry a high margin of error when recent government data is not available to correct course.
In this context, interest rate decisions or monetary policy guidance become subject to excessive volatility, which can lead to miscommunication between the Fed and financial markets. For example, any delay in understanding inflation trends could prompt the Fed to tighten or ease monetary policy based on uncertain estimates, increasing the risk of losing credibility or causing sharp market volatility.
Financial Market Turmoil: Heightened Sensitivity and Amplified Volatility
The absence of official indicators turns financial markets into a field of accelerated speculation.
In recent days, the volatility index (VIX) has risen by more than 20%, while short-term Treasury yields have risen sharply due to concerns about the lack of clarity on future fiscal policy.
Investors, who typically rely on monthly data to assess risk, have increasingly turned to alternative indicators such as weekly unemployment claims and private banking data, which are partial and volatile.
This reality recalls the 2018-2019 shutdown, when Moody's Analytics estimated that market volatility increased by an average of 35% during the data outage, contributing to a decline in investor confidence and temporarily raising the cost of government borrowing.
A shutdown lasting more than a month amid such uncertainty could distort the pricing of US risks in global markets, especially given the close correlation between US Treasuries and global interest rates.
Implications for International Institutions and the IMF: Flawed Evaluation References
Institutions such as the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) rely on official US data to prepare their quarterly global economic outlook reports.
The disruption of this data forces them to use uncertain estimates, leading to a decline in the quality of global forecasts. IMF officials have expressed concern about the loss of the ability to assess the impact of US monetary policy on emerging markets and exchange rates, especially in light of the turmoil in energy and commodity policies.
Thus, the impact of the shutdown extends from the local economy to the global financial system, as international forecasts become hostage to purely domestic US political variables.
The Cumulative Effect: From Loss of Transparency to Erosion of Institutional Trust
In the medium term, the recurrence of these outages weakens the institutional reliability of US data, which has long been the gold standard for transparency and statistics.
Brookings Institution experts warn that the continuation of this phenomenon could undermine the United States' status as a source of accurate economic information, pushing investors and institutions to seek external analytical alternatives or business models that are not subject to government review.
The lack of regular data also complicates Congress's ability to assess budgets and tax policies, making fiscal decision-making more dependent on political positions and less based on empirical evidence.
In sum, the disruption to the production and dissemination of economic data represents one of the invisible but fundamental aspects of the federal shutdown, transforming it from a government funding crisis into a knowledge crisis that undermines the nation's ability to accurately read its economic reality.
What is happening now is not simply a halt in spending; it is a disruption in the national economic sensory system that measures the pulse of markets, inflation, and growth.
As the crisis continues, trust between monetary and financial institutions erodes, threatening to transform administrative paralysis into paralysis in economic judgment and strategic decision-making—the most dangerous repercussions of the shutdown.
Fifth: Estimates of Economic Losses: Between the Immediate Impact and the Extended Structural Consequences
Immediate Cost: Direct Contraction in Economic Activity and Household Spending
Historical comparisons show that the federal shutdown does not pass without a tangible economic impact, even if wages are subsequently restored.
According to Congressional Budget Office (CBO) estimates, the 2018–2019 shutdown cost the US economy approximately $11 billion in short-term GDP, of which $3 billion is a permanent, irrecoverable loss due to the halt in production activities and delayed investments.
In the current shutdown, analyses by Oxford Economics and Moody's Analytics indicate that each week of disruption shaves between 0.1 and 0.2 percentage points from the quarterly GDP growth rate.
Based on these assumptions, a three-month shutdown (a full fiscal quarter) could result in a loss of between 1.2 and 2.4 percentage points in growth during the same quarter—a historically unprecedented rate.
These figures translate into an actual decline in personal consumption. Economists estimate that each week of the shutdown leads to an average drop in household spending of about $1.5 billion, particularly in areas highly dependent on federal jobs, such as Washington, D.C., and the East Coast.
This is accompanied by a temporary decline in consumer confidence, according to the University of Michigan Sentiment Index, which showed an initial decline of about 6 points since the beginning of the crisis.
Medium-Term Effects: Disruption in Business Confidence and Slowdown in Public Investment
In the medium term, the shutdown is a deterrent to investment activity, not only due to delays in government contracts and procurement, but also due to the contraction in business confidence.
Companies that rely on federal spending or public tenders tend to postpone hiring and investment decisions, which leads to a freeze in private capital flows into infrastructure and technology.
Conference Board data shows that executive confidence indexes fell by nearly 8% in the first weeks of the shutdown, a rate similar to the rate experienced during the 2019 economic shutdown.
If the shutdown continues for more than two months, it could erode domestic investor confidence in the administration's ability to maintain fiscal policy stability, resulting in a widening of risk premiums on corporate bonds and higher borrowing costs.
States and local governments that rely on federal transfers to fund education and infrastructure are forced to draw down their reserves, weakening their fiscal balances and putting pressure on their future credit ratings.
The Long-Term: A Cumulative Impact on Productivity and the U.S. Economy
If the crisis extends over several months or becomes recurring, the losses extend beyond the immediate dimension to a structural erosion of national productivity.
The continued suspension of scientific research programs, the freezing of university grants, and the delay in federal capital spending—particularly in the renewable energy and technology sectors—lead to a long-term investment gap.
According to estimates by the National Bureau of Economic Research (NBER), each month of the shutdown shaves about 0.05 percentage points off long-term annual growth due to reduced accumulation of human and technical capital.
These structural losses impact the United States' competitive position in global markets, as its ability to fund innovation and research declines, while competing economies (such as China and the European Union) shift their focus to green technology and digital infrastructure sectors without a similar administrative disruption.
Sixth: Impact on Markets and Public Finance — Confidence Dynamics, Bonds, and Credit Pricing
Treasuries and Sovereign Debt: Escalating Risk Premiums
In the early days of the shutdown, financial markets often remain cautiously cautious, without an immediate sharp decline in stock indices, as investors bet on a quick resolution.
However, as the crisis extends and talk grows of possible permanent layoffs or a restructuring of federal spending, markets begin to reprice risk.
Market data indicates that two-year Treasury yields rose by about 25 basis points during the second week of the shutdown, while credit rating agencies, such as Fitch Ratings, began revising their forecasts for the “political and financial stability” of the United States, considering that the continued shutdown could be interpreted as institutional weakness in public debt management.
This rise in yields translates into an additional cost to the public treasury exceeding billions of dollars annually if the trend continues, meaning that the domestic political crisis is directly transforming into a long-term financial burden.
Liquidity and the Banking Sector: Double Pressure from Volatility and Regulatory Uncertainty
The shutdown is also accompanied by a partial shutdown of regulatory and supervisory bodies such as the Securities and Exchange Commission (SEC) and the Comptroller of the Currency, leading to a slowdown in securities registrations and banking approvals.
This institutional shutdown weakens liquidity flows and disrupts secondary markets, temporarily reducing initial public offerings and increasing institutional reliance on high-cost short-term financing.
Analysts warn that the lack of regular oversight of financial institutions during prolonged shutdowns could create compliance gaps and systemic risks, particularly in derivatives and credit markets.
Historically, markets experienced a 10% decline in initial public offerings and a slowdown in institutional trading during the 2019 shutdown due to the lack of timely regulatory approvals.
Investor Confidence and Global Markets: From Resilience to Systemic Caution
While the S&P 500 Index demonstrates initial resilience to short-term political crises, repeated shutdowns and heightened political rhetoric are eroding global investor confidence in the stability of the US financial system.
This decline in confidence could translate into a partial strategic shift in international investment portfolios toward alternative assets such as European bonds or gold, which has begun to manifest in the 3.5% increase in the price of an ounce since the first week of the crisis.
If the shutdown is accompanied by a debt ceiling crisis or default, a double shock could occur in markets, combining uncertainty about liquidity and financial sovereignty.
This would make the current shutdown a crucial test of the sustainability of US creditworthiness (AAA), which has long been considered a global standard of confidence.
Hence, preliminary indicators suggest that the current federal shutdown has gone beyond a temporary political event to a multidimensional economic stressor:
It is hitting short-term growth, undermining medium-term investment confidence, and leaving long-term scars on productivity and financial institutions.
If the shutdown continues in the absence of a political settlement, the silent economic cost—in the form of weakened confidence, increased funding costs, and eroded institutional credibility—could be far greater than the announced quantitative losses.
Seventh: The External Consequences of the Shutdown—International Confidence, Aid, and Strategic Relationships
The Image of American Institutions Abroad: The Erosion of Confidence in the Stability of the Federal State
The current federal shutdown is viewed abroad not only as a domestic financial issue, but also as an indicator of the fragility of American governance. Among allies and trading partners, the recurring failure to pass budgets is seen as evidence of the declining institutional capacity of the United States to manage its public affairs regularly.
European and Asian diplomatic reports, as monitored by the Financial Times and Reuters, have expressed growing concern in markets and allied countries that the shutdown could become a recurring political behavior reflecting a state of "chronic legislative paralysis" within the American system.
This perception weakens the political appeal of the American democratic model, especially in the face of international adversaries such as China and Russia, who capitalize on the narrative of "declining Western institutional competence" to highlight the superiority of their systems in stability and implementation.
Accordingly, the shutdown has become a symbolic tool in the international propaganda war, through which opponents promote the idea that American political divisions undermine its leadership of the liberal global order.
Foreign Aid and International Development: Funding Freezes and Delays in Commitments
In practice, the shutdown disrupts the transfer of funds and appropriations for foreign aid managed by departments such as the State Department and the U.S. Agency for International Development (USAID).
Disbursements of funding for humanitarian and development programs in more than 70 developing countries have been halted or delayed, including projects related to public health, education support, and relief in crisis areas.
According to unofficial internal data, more than $2.8 billion in approved allocations for the last quarter of 2025 has not yet been disbursed due to the freeze on operational appropriations.
Without funding, USAID missions are forced to temporarily reduce their field activities, while some contracts with international partners and local organizations are suspended.
This delay not only affects the humanitarian aspect, but also has direct political repercussions, as it weakens US influence in areas of strategic competition—especially in Africa and Southeast Asia—where other powers are competing to fill the void through alternative funding (Chinese or Gulf).
The current shutdown also follows a series of executive orders taken by the Trump administration in early 2025 to redirect some aid (through rescission authority), reinforcing the impression that US aid policy has become highly volatile and unreliable.
Diplomatic and Security Relations: Mission Disruptions and Freezing of Sensitive Procedures
On the diplomatic and security front, the effects of the shutdown are most evident in the slowdown in the activities of small US missions abroad, where staff face operational difficulties due to a lack of funding for logistics, travel, and security.
The State Department and the Pentagon have also temporarily suspended processing of some arms export licenses and emergency funding for defense assistance operations, which could delay security commitments to strategic partners in Eastern Europe or East Asia. According to an analysis by the Center for Strategic and Budgetary Assessments (CSBA), if the shutdown continues for two months or more, it could freeze approximately 5% of the Pentagon's external technical and logistical support contracts, directly impacting US deterrence capabilities in sensitive theaters such as the South China Sea and the Middle East.
At the diplomatic level, more than 400 bilateral and multilateral meetings have already been postponed, some related to climate and trade negotiations, deepening the international impression that the United States is less capable of sustained international coordination.
Implications for International Financial and Credit Relations
The shutdown also raises concerns among creditors and international financial institutions about the US government's ability to meet its external obligations or repay certain multilateral financing obligations (such as Washington's contributions to the World Bank and the International Monetary Fund).
Although these obligations are not actually threatened in the near term, the financial symbolism of the interruption in US government funding affects the dollar's image as a stable sovereign currency.
A recent Bloomberg Economics report indicated that US bond yields have risen by 30 basis points since the start of the shutdown, while international investors' appetite for long-term US assets has declined by 5%.
This temporary decline in confidence reflects market concern about the politicization of US fiscal policy and increases other central banks' reliance on diversifying their reserves away from the dollar and toward the Chinese yuan or the euro.
Geopolitical Impact: From Leadership Vacuum to Opportunities for Adversaries
Reports from the European Council on Foreign Relations (ECFR) and the Asia Society Policy Institute agree that the current US shutdown provides Washington's adversaries with a strategic opportunity to reshape the balance of soft power.
Powers such as China, Russia, and Iran are exploiting the period of US administrative paralysis to intensify their diplomatic and economic efforts in Washington's traditional spheres of influence, presenting themselves as a more stable and reliable actor.
In this context, the shutdown is viewed as a weakness in US global leadership, reflecting internal divisions and an inability to manage institutional continuity—which threatens to undermine US influence in matters of international trade, energy, and security assistance.
In sum, the repercussions of the federal shutdown extend beyond the domestic economy to affect the institutional prestige and leadership capacity of the United States on the international stage.
The disruption in aid flows, the postponement of financial commitments, and the slowdown in diplomatic activity all signal a diminishing reliability of Washington as a stable strategic partner.
If the disruption persists for a prolonged period, the geopolitical cost—represented by the loss of international trust and the rise of adversaries—could far outweigh any direct economic losses, posing a structural challenge to the United States' standing within the international system.
Eighth - The Legal Aspect: The Legitimacy of Administration Actions and the Limits of Executive Authority
The Constitutional and Regulatory Framework: The Principle of Separation of Powers and Spending Control
The federal shutdown is essentially governed by a fundamental constitutional principle: “The power of spending is exclusively vested in Congress” under Article I of the U.S. Constitution (Article I, Section 9), which states that “no money shall be drawn from the treasury, but by lawful appropriation of Congress.”
This principle is translated into practical terms through the Antideficiency Act, which prohibits federal agencies from continuing to spend or commit to financial contracts in the absence of approved funding.
Thus, any attempt by the executive branch to redirect funds or disburse appropriations without legislative approval represents a potential abuse of Congress’s authority and opens the door to dual judicial and legislative oversight.
This law is considered one of the strictest restrictions in the American system, punishing violations with fines or administrative dismissal and requiring agencies to immediately report any breach to the White House Office of Budget (OMB) and to Congress.
Mass Firing (RIF) Procedures and Limits of Implementation During a Shutdown
Regarding administration threats to terminate federal employees, the legal framework severely restricts such steps.
Workforce reductions are governed by a set of laws and regulations, most notably the Civil Service Reform Act and Office of Personnel Management (OPM) regulations, which require:
• At least 60 days' advance notice before any mass termination (according to the Reduction in Force (RIF) regulations).
• Justification based on "substantiated and proven operational or financial reasons."
• Guaranteeing employees the right to appeal to the Merit Systems Protection Board (MSPB) or federal courts in the event of a violation of procedures.
Therefore, political threats of termination during a shutdown collide with a legal reality that makes their actual implementation a lengthy and judicially complex process.
Employee unions such as the American Federation of Government Employees (AFGE) have indicated that they will immediately appeal to the MSPB and federal courts any decisions made without clear notice or legal justification. According to a Congressional Research Service (CRS) study (Report 2024/CRS-R4753), any attempt to terminate employees during a government shutdown is a clear violation of the spirit of the Civil Service Act and could result in revocation of the decisions and reinstatement of employees with compensation.
Redirecting Funds: Between Executive Power and Congressional Approval
The administration may seek mechanisms such as rescission or reprogramming as alternative means to continue some spending without new legislation.
However, these tools are subject to strict oversight by the Budget Control Act and the Impoundment Control Act of 1974.
These laws require the president to notify Congress in writing of any intent to freeze or redirect funds within 45 legislative days, and any action without congressional approval is a potential constitutional violation of the doctrine of “exclusive fiscal jurisdiction of Congress.”
The District Court previously held in GAO v. Nixon (1973) held that the president does not have the authority to unilaterally revoke or freeze appropriations approved by Congress, considering this an imbalance of powers.
Thus, any executive decision to freeze funding during a shutdown could face immediate legal challenges from Congress or affected parties and could be considered an "unlawful usurpation of appropriation power."
Judicial and Oversight Paths to Appeal: From Unions to Congress
If any of these measures are implemented, there are multiple legal and administrative avenues for appeal, including:
- The Federal Labor Unions (FTU), which have the right to file class-action lawsuits before federal labor courts.
- The Merit Systems Protection Board (MSPB), which can immediately halt layoffs with temporary injunctions.
- The Government Accountability Office (GAO), which has the authority to scrutinize the legality of executive spending during the shutdown and can report to congressional committees.
- The Congressional Oversight and Appropriations Committees, which have the authority to subpoena and question officials once sessions resume.
Combined, these paths make any unilateral action by the administration risk judicial and political paralysis, as courts could freeze or invalidate decisions before they take effect.
Historically, experience has shown that the negotiating power in previous shutdowns has been more symbolic than executive.
In the 2018–2019 shutdown, the Trump administration threatened similar measures, but White House legal advisors warned of the dangers of “constitutional overreach,” making the threats little more than a negotiating tool.
The Political Dimension of Law: Law as a Negotiating Weapon
From a strategic perspective, legal escalation can be understood within the context of a “negotiating war” between the legislative and executive branches.
The administration threatens executive action to generate psychological and political pressure on Congress, while using legal opposition and lawsuits to create time and institutional costs that render the threat meaningless.
Thus, in this confrontation, the law transforms from a tool of control to a tool of balance of power—with each party knowing that any blatant transgression of legal boundaries will expose them to either a legal challenge or a high political cost.
Brookings Governance Studies (2025) estimates that the probability of any separation or redirection of funds passing without legislation is no more than 15% due to the intensity of institutional oversight and the multiple layers of challenge.
Overall, the current shutdown places the executive branch in a double legal bind:
On the one hand, it seeks to assert its ability to maneuver and exert pressure, while on the other, it is constrained by a complex legal system that imposes overlapping approvals, notifications, and oversight.
In light of these balances, threats of separation and recapitalization are likely to remain symbolic negotiating tools, while direct executive action is excluded for fear of sliding into an open constitutional crisis.
Thus, the legal aspect not only provides a hedge of legitimacy, but also a means to contain political escalation and prevent the financial dispute from turning into a governance crisis that exceeds the American system's capacity for institutional stability.
Ninth - Electoral and Political Implications:
The Shutdown as a Test of Public Opinion and Reshaping the Electoral Mood
The current federal shutdown comes at a critical moment in the American political cycle, as the country heads into the midterm congressional elections amid sharp partisan polarization and declining voter confidence in federal institutions.
In such a context, the shutdown becomes a direct test of each party's ability to manage the government under pressure, especially since the American public typically holds the party in control of the White House responsible for any government shutdown, as demonstrated by the experiences of 1995, 2013, and 2018–2019.
According to a September 2025 Pew Research poll, 61% of Americans believe "the president bears the greatest responsibility for the shutdown," compared to 29% who blame Congress as a whole. These figures show that any deterioration in services or delays in payrolls could translate directly into political losses for the Trump camp and Republicans, especially in swing states like Michigan, Pennsylvania, and Wisconsin, where many voters rely on federal funding programs and social support.
In contrast, Democrats are seeking to frame the crisis as a "fight over economic justice," arguing that the White House is using the shutdown as a tool to undermine vulnerable groups. This rhetoric could mobilize the liberal base and increase voter turnout in urban areas. However, a prolonged shutdown could lead to voter fatigue on both sides, creating a mood of "mutual rejection," weakening turnout and making the outcome more volatile.
Electoral Constituencies: Those Directly Affected by the Shutdown
In practice, the shutdown affects broad segments of society, some of which are concentrated in electorally crucial states.
Nearly 800,000 federal employees are distributed across key states like Virginia, Maryland, Georgia, and Arizona, areas experiencing fierce electoral competition. Programs such as:
• The Women and Children's Income Tax (WIC) food assistance program, which serves more than 6.5 million families;
• Housing and Urban Development (HUD) programs, which fund projects in cities like Detroit and Philadelphia;
• Federal contractors, the approximately 4 million private sector workers who rely on regular government payments.
The disruption or delay in funding these programs makes the electoral damage felt locally, as the media re-emphasizes the daily struggles of families and employees, reinforcing the perception of a "failure of governance" even among independent voters.
A review of the 2019 election results showed that the counties most affected by the shutdown saw an electoral shift toward the Democrats by 2.3 to 3.8 percentage points compared to the average for other states, according to an analysis by the Harvard Kennedy School Election Lab (2020).
Political Narrative: Who Controls the Interpretation of the Crisis?
In the American landscape, the narrative is as important as the event itself. While Republicans, led by Trump, are trying to present the shutdown as a “battle to reform the bureaucracy and control spending,” Democrats are portraying it as “political blackmail that punishes ordinary citizens.”
This struggle over media discourse is being waged across major news networks and social media platforms. Studies by the Media Research Center (2025) indicate that negative coverage directed at Trump during the first week of the shutdown reached 67% on national television.
Whether any party can monopolize the interpretation of the crisis will be a decisive factor in guiding the votes of independent voters, who constitute approximately 28% of the total voting bloc.
These voters are typically less ideologically committed and more responsive to tangible economic indicators—such as wages, consumer confidence, and the quality of public services—meaning that a prolonged or worsening financial crisis could translate directly into electoral losses for the executive branch.
The Cumulative Impact on the Image of the Political System and Institutional Trust
Beyond partisan calculations, the shutdown poses a deeper institutional challenge: the erosion of trust in the American political system itself.
According to a Gallup poll (October 2025), confidence in the “ability of the federal government to perform its basic functions” has fallen to just 29%—the lowest level since 1974.
This decline not only harms the ruling party, but also fuels political apathy and strengthens populist movements or independent candidates who present themselves as “anti-establishment” alternatives.
The image of the United States abroad—as a viable, institutionalized nation—is also shaken at such moments, which in turn affects American “soft power,” as recurring budget crises are interpreted as indicators of governance dysfunction, rather than merely internal party disputes.
Forward-looking reading: Who wins and who loses?
From a realistic perspective, early indicators show that Republicans bear the brunt of the shutdown in the public consciousness, given that they run the White House.
However, if the Trump administration can turn the crisis into a symbol of its fight against corruption or "excessive" bureaucracy, it may exploit it to further mobilize its populist base in rural areas and the South. As for the Democrats, their success depends on their ability to present a unified and coherent narrative linking the shutdown to advocating for vulnerable groups and social justice, without appearing to be "obstructionists."
A FiveThirtyEight analysis for October 2025 indicates that a prolonged shutdown could reduce the Republicans' chances of retaining their House majority by 8 to 10 percentage points if it continues through early November.
The bottom line, then, is that the federal shutdown, in light of the approaching midterm elections, is not just a financial crisis; it is open political theater that is redistributing power between the two parties.
On one hand, the White House is seeking to use it as an electoral mobilization tool and craft a "symbolic victory," while on the other, Democrats are trying to turn it into evidence of the executive branch's mismanagement.
Ultimately, the balance of economic and media pain—the extent to which citizens feel the direct impact versus the extent to which they buy into each party's narrative—will determine the ultimate direction of public opinion, and thus the contours of the next Congress.
Conclusion
The current federal shutdown is more than just an administrative stumbling block in passing a funding bill; it is a profound reflection of a structural shift in the relationship between authority and legitimacy within the American political system. The current crisis reveals that the shutdown is no longer merely a byproduct of partisan differences over budget priorities, but rather a strategic tool in the struggle over the definition of the state and its social and economic role.
Politically, it appears that the United States is witnessing a shift from consensual negotiation to zero-sum authoritarian conflict, whereby the tools of governance—such as finance, the budget, and executive decisions—are used as political weapons to consolidate ideological positions, rather than as means of managing public services. This shift weakens the spirit of “corporate governance” that has characterized the American experience for decades and undermines the system’s ability to provide a model of political stability.
Economically, the repercussions of the shutdown go beyond direct losses in GDP or consumption to cumulative risks that affect overall confidence in the state’s ability to fulfill its financial and regulatory obligations. Disrupting federal data, freezing contracts, and postponing social programs creates feedback loops that impact growth, further erode market confidence, and could undermine the dollar's status as a safe haven if the crisis recurrs in the future.
Legalally, the shutdown demonstrated the limits of what the executive branch can exercise in the absence of clear legislative authorization and served as a reminder that the American legal system is designed to deter individualistic governance. The threat of mass dismissals or redirection of funds collided with a complex web of constitutional oversight, confirming that the American system—despite its crises—still possesses tools to constrain the executive branch's arrogance and protect the principle of separation of powers.
Externally, the crisis has had a negative symbolic impact on the United States' institutional image at a time when the international system is witnessing an escalation of geopolitical competition. When the world's largest government shuts down for domestic reasons, global confidence in "American stability" declines, and caution in markets and international diplomacy regarding Washington's long-term commitments increases.
Electorally, the shutdown is reshuffling party calculations as the midterm elections approach. Republicans face a difficult test in justifying the crisis to a polarized public, while Democrats seek to exploit the shutdown as a symbol of White House mismanagement. However, the ultimate outcome will depend on how quickly the crisis is resolved and who succeeds in controlling the public narrative that will be stored in the memory of the American voter.
Ultimately, the current federal shutdown stands out as a warning sign of the erosion of traditional checks and balances between the executive and legislative branches, and the urgent need for institutional reforms that prevent the use of public finances as a tool of political pressure. Among the proposals currently being discussed by Washington think tanks are:
- Adopting a temporary automatic continuing resolution to prevent a government shutdown in the event of a budget failure.
- Restricting the use of executive orders to reallocate funds or terminate employees during a shutdown.
- Strengthening the role of the Government Accountability Office (GAO) in prior oversight of spending.
- Reconsidering the budget negotiation process to separate it from major ideologically contentious issues (such as immigration and health care).
Overcoming the current crisis means not just reopening the government, but restoring confidence in the very idea of the American state—a state governed by law, not threats, and by institutions, not maneuvers. The current shutdown, despite its cost, may be an opportunity to rethink the future of American governance before political discord devolves into a permanent systemic crisis that impinges on the very essence of the Western democratic experience.
Resources
- Congressional Budget Office. Potential Effects of a Federal Government Shutdown. واشنطن: مكتب الميزانية في الكونغرس، 2025.
https://www.cbo.gov/publication/61773 - Congressional Budget Office. The Effects of the Partial Shutdown Ending in January 2019. واشنطن: CBO، 2019at:
https://www.cbo.gov/publication/54937 - Brookings Institution. “What Is a Government Shutdown and Why Are We Likely to Have Another One?” Brookings, مقالة تحليلية.
https://www.brookings.edu/articles/what-is-a-government-shutdown-and-why-are-we-likely-to-have-another-one/ - Reuters. “US government shutdown: How it affects key economic data publishing.” 6 أكتوبر 2025.
https://www.reuters.com/world/us/us-government-shutdown-how-it-affects-key-economic-data-publishing-2025-10-06/ - AP News. “Government shutdown threatens food aid program relied on by millions of families.” أكتوبر 2025.
https://apnews.com/article/7b1d5fc317b25b79015ea335197f37bd - Investopedia. “How A U.S. Government Shutdown Could Affect The Economy.” (تاريخ مقالة حديث).
https://www.investopedia.com/how-a-us-government-shutdown-could-affect-the-economy-11820557 - American Century. “How Do Government Shutdowns Affect Markets?” مقالة تحليلية.
https://www.americancentury.com/insights/government-shutdown-market-impact/ - Bipartisan Policy Center. “What Happens If the Government Shuts Down?”
https://bipartisanpolicy.org/explainer/what-happens-if-the-government-shuts-down/ - Congress.gov / CRS. Past Government Shutdowns: Key Resources. At:
https://www.congress.gov/crs-product/R41759 - USAFacts. “Everything You Need to Know about a Government Shutdown., at:
https://usafacts.org/articles/everything-you-need-to-know-about-a-government-shutdown/
