The United States Congress failed to pass a budget before the midnight deadline, triggering the first federal government shutdown in nearly seven years — and the third under President Donald Trump.

The White House Office of Management and Budget ordered federal agencies to activate emergency plans due to the funding lapse. Government operations are now limited to essential services, while hundreds of thousands of federal employees are affected and numerous public services disrupted.

A deadlock between Republicans and Democrats over healthcare subsidies — also serving as a stage for the 2026 midterm elections — means the shutdown could drag on. According to Bloomberg Economics, if it lasts up to three weeks, the unemployment rate could rise to 4.6%-4.7% from 4.3% in August, since furloughed workers are counted as temporarily unemployed.

Trump signaled he may use the moment to carry out mass layoffs of federal employees, beyond the 750,000 workers already affected by the suspension. Such a move risks worsening the economic fallout and prolonging the shutdown’s impact.

This wave of layoffs would add roughly 150,000 employees leaving on October 1 through a phased resignation program under the DOGE scheme initiated by Elon Musk. Combined with early retirements and staffing cuts this year, the situation could trigger recessions in certain regions, including the Washington, DC metropolitan area.

Historically, most of the economic damage from shutdowns is recoverable once they end, though not entirely. The Congressional Budget Office (CBO) recorded that the US economy permanently lost about US$3 billion out of US$11 billion in reduced output from the 2018–2019 partial shutdown, the longest in history.

The current shutdown also delays key economic data releases, including the jobs report from the Bureau of Labor Statistics scheduled for this Friday. The Federal Reserve, which is closely monitoring data to gauge interest rate direction, now has to operate without crucial information.

So far, Democrats and Republicans show no signs of compromise over Democratic demands to include healthcare subsidies and other programs in the stopgap spending bill.

Republicans, needing at least eight Democratic votes to pass the budget, pledged to keep the Senate in session — with only a one-day break for Yom Kippur — and to continue presenting proposals until Democrats give in.

“They need to release this hostage,” Senate Majority Leader John Thune told reporters.

Meanwhile, Senate Democratic Leader Chuck Schumer faces heavy pressure from progressives to use the shutdown deadline as leverage against Trump. He was sharply criticized in March for supporting a temporary budget extension through September 30 without including Democratic priorities.

Trump and Republican leaders argued that their stance is stronger, having united the party base behind a straightforward bill. Thune added that the public will likely blame Democrats, just as Republicans were blamed during the 2013 shutdown over Obamacare, since Democrats are seen as demanding extra conditions.

The House had already passed a budget on September 19 to fund the government through November 21 without major add-ons. However, the measure twice failed to secure the required eight Democratic votes in the Senate.

On Tuesday night, three Democrats joined the Republican majority in supporting the bill, up from only one previously. Still, five more votes are needed to end the shutdown.

A Democratic alternative that added US$1.5 trillion for healthcare and other programs also failed in the Senate.

Some moderate Democrats signaled they could accept a short-term bill if serious negotiations on healthcare costs begin immediately. Without that, Obamacare’s premium tax subsidies will expire on December 31, putting about 20 million policyholders at risk of steep premium hikes. Notices of rate increases are set to go out later this month.

Several moderate Republicans indicated willingness to negotiate an extension, possibly with new income thresholds.

After a meeting in the Oval Office on Monday, Trump suggested a long-term agreement on Obamacare was still possible. However, he again threatened mass layoffs during the shutdown and posted a satirical AI deepfake video portraying Jeffries in a sombrero, which House Democratic leaders condemned as “racist.”

“He is treating the American people like pawns,” Schumer said, stressing that Trump now bears “full responsibility” for every layoff that occurs.