Explainer: US government shutdown nearing, its impact, what next

The US is facing a government shutdown amid deadlock over demands from Republicans for deep public spending cuts.

The political deadlock stemmed from bitter ideological differences among the Republicans in the House of Representatives.

As funding for federal agencies will run out at midnight on September 30, the US Congress need to pass 12 appropriations bills to finance government operations in time for the start of the new fiscal year on October 1.

The funding fight focuses on a relatively small slice of the $6.4 trillion US budget for the current fiscal year.

The US Congress must pass legislation that Democratic President Joe Biden can sign into law by midnight Saturday (0400 GMT on Sunday) to avoid furloughs of hundreds of thousands of federal workers and halting a wide range of services, from economic data releases to nutrition benefits, for the fourth time in the last decade.

House Republicans have rejected spending levels for fiscal year 2024 set in a deal Speaker Kevin McCarthy had negotiated with Biden in May.

The agreement included $1.59 trillion in discretionary spending in fiscal 2024.

Republicans are demanding another $120 billion in cuts, plus tougher legislation that would stop the flow of immigrants at the US-Mexico border.

But, US lawmakers are not considering cuts to popular benefit programs such as Social Security and Medicare.

The Senate’s stopgap funding measure would extend federal spending until November 17, and authorizes roughly $6 billion each for domestic disaster response funding and aid to Ukraine to defend itself against Russia.

On Thursday, the US Senate and the House were due to push ahead with conflicting government funding plans, raising the chances of the fourth partial shutdown of the federal government.

The Senate has planned a procedural vote on a stopgap funding bill that has broad bipartisan support in the chamber, while the House of Representatives is set for late-night votes on four partisan appropriations bills that have no chance of becoming law.

McCarthy is facing intense pressure from his caucus to achieve their goals. Several hardliners have threatened to oust McCarthy from his leadership role if he passes a spending bill that requires any Democratic votes to pass.

The US economy maintained a fairly strong 2.1% pace of growth in the second quarter and appears to have gathered momentum this quarter with a resilient labor market driving strong wage gains.

Growth estimates for the July-September quarter are currently as high as a 4.9% rate. But the fourth quarter could see a sharp slowdown if there is a US government shutdown.

(With inputs from agencies)