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Estimated reading time of this week’s update: 14 minutes
(1) SHUTDOWN DAY 20: Speaker Johnson Keeps House Out of Session; Senate Has Rejected House-passed Continuing Resolution (CR) 10 Times; Dems Continue Withholding Support from CR to Force Negotiation on Health Subsidy Extension and Restoration of Impounded Funds; Most Federal Employees Received Last (Partial) Pay Check on October 10.
Background: The Federal government shut down on October 1st when the new fiscal year began because Congress had not passed funding bills for fiscal year (FY) 2026. Shutdowns are required by the Antideficiency Act, which makes it a criminal violation for federal employees to incur obligations on behalf of the federal government without congressional spending authority.
Furloughed vs. Excepted Employees: During a shutdown, the Antideficiency Act requires that Federal agencies furlough employees (no work and no pay until appropriations are enacted) unless they are designated as “excepted” because their responsibilities impact the “safety of human life or the protection of property.”
Excepted employees are required to work, but are generally not paid until appropriations are enacted (unless funds authorized outside the annual appropriations process, called “mandatory spending,” are available to pay them.) Mandatory funds were used to pay military personnel last Wednesday, although their next paycheck is unclear.
President Trump’s Office of Management and Budget (OMB) has largely ignored the strict requirements of the Antideficiency Act and has based furlough decisions on which activities the Administration chooses to continue for policy reasons.
Layoffs: The Administration has chosen to announce layoffs (reductions-in-force or “RIFs”), using the shutdown as an excuse to permanently shut down offices and agencies it opposes. However, a District Court has placed these layoffs on hold, as explained in the article below.
House-Passed CR: The House of Representatives in September passed 217-212 a stopgap continuing resolution (“CR”) to provide temporary funding through November 21st, but the Senate has failed has to pass the measure 10 times, most recently last Thursday, Oct. 16. (The Senate has also failed 7 times to pass a Democratic alternative CR, most recently on Oct. 9.)
5 More Votes Needed in Senate: With 60 votes required in the Senate to advance a CR, Republicans need the support of 8 Democrats or Independents to pass the measure. Thus far, only 3 have supported the stopgap funding (Cortez Masto (D-NV), Fetterman (D-PA), and King (I-ME). One Republican (Paul, R-KY) opposes the funding levels in the CR, which is why the 53-member Senate Republican conference needs to find 8 votes to reach 60.
Senate Dems Withholding CR Support to Force Negotiations on Healthcare and Spending Authority: Nearly all Senate and House Democrats are continuing to withhold their support of the stopgap measure in order to force a negotiation with Republicans to enact provisions that would:
Even if negotiations begin, states are concerned that it’s already too late to extend the enhanced subsidies before consumers begin choosing their ACA plans for 2026. In fact, a dozen states have already announced large hikes in ACA premiums based on the assumption that the enhanced subsidies will expire at end of December.
So far, Republicans Not Negotiating: There have been no negotiations and House Speaker Mike Johnson has kept the House of Representatives out of session for 3 weeks, in order to pressure Senate Democrats to accept the House-passed CR. Politico reported yesterday that, “the White House feels as confident about the shutdown on day 19 as it was on day one–in part because congressional Republicans have, for the most part, remained largely in line.”
Backpay: Following indications from OMB that the Administration may ignore the legal requirement to provide backpay to furloughed employees, Republican Senator Lisa Murkowski of Alaska last week joined more than 150 Democrats in signing a letter to OMB Russell Vought demanding that the Administration provide backpay. Text of the letter.
Ongoing shutdown impacts:
The shutdown has halted federal worker pay for “excepted workers” (who continue to work) and furloughed workers (who will not return until the shutdown is over). The last (partial) paycheck was October 10, although some excepted employees—including military personnel and ICE, TSA and other DHS employees—are being paid from mandatory (not annually appropriated) funding sources (the July budget law (OBBBA).
The Judiciary: On Friday, the office that administers the federal court system said that as of today (Monday), the Judiciary will not have funding to “sustain full, paid operations.” The Administrative Office of the U.S. Courts said in its Friday statement that while federal judges will continue to be paid as required by the Constitution, court staff might be limited to working on lifesaving or emergency cases, and some might be required to work without pay as required by the Antideficiency Act.
De Facto Shuttering of Education Dept: Washington Post reports that “the prolonged government shutdown is helping the Trump administration advance its goal of closing the Education Department” with a new round of attempted layoffs raising concerns that the Trump Administration is attempting a de facto shuttering of the department without congressional action. Education Secretary Linda McMahon says the shutdown confirms “the federal Department of Education is unnecessary.”
(It remains to be seen how the massive layoffs at DoEd will impact distribution of funds for special needs and economically disadvantaged students, charter schools, and veterans; and how the processing of student loans will be impacted by poorly planned, chaotic transfers of vital functions to other departments—without any public hearings or congressional oversight.)District of Columbia: Politico reports, “The District’s chief financial officer has estimated that a fifth of the 200,000 federal jobs in the city will go away. There are similarly grim projections for federal contracting. The housing market was already softening, pre-shutdown. The unemployment rate was up nine times as much as the rest of the country. And now the closure of the Smithsonian and the cancellation of routine federal meetings is battering the hospitality industry.” In addition, the city’s Metro system is being clobbered by reduced ridership and the Administration is seeking to relocate many remaining federal workers to other parts of the country.
Partisan Infrastructure Freeze: OMB Director Russell Vought, in order to increase political pressure on Senate Democrats, announced a work pause on federally funded infrastructure projects in states that voted against Trump in 2024.
Fossil fuel-related workers, not furloughed: New York Times reports that “Federal workers who issue permits for oil, gas and mining operations are on the job, along with those working to repeal pollution limits.” The Interior Department’s justification is that their furlough decisions are based on President Trump’s declaration in January of a “national energy emergency”—which is unrelated to the legal requirements of the Antideficiency Act to furlough all employees except for those designated as “excepted” for the protection of life or property.
Food Stamps (Supplemental Nutrition Assistance Program): Agriculture Dept. warned in an October 10 letter to state agencies 42 million people could face disruptions to their food benefits if the shutdown continues into November. Minnesota said they could run into a shortfall later in October.
Aviation: The AP reported last week that the shutdown “is putting a renewed spotlight on the cracks in the U.S. aviation system… Since the shutdown began Oct. 1, the Federal Aviation Administration has reported controller shortages in cities across the U.S., from airports in Boston and Philadelphia, to control centers in Atlanta and Houston. Flight delays have spread to airports in Nashville, Dallas, Newark and more.”
National Nuclear Security Administration has furloughed most of its staff.
Work on the 12 Regular Appropriations Bills is another casualty of the shutdown. Last week, the Senate failed to advance the Defense Appropriations bill due to ongoing partisan gridlock.
See additional ongoing impacts in last week’s edition of Trillions. (Access the entire archive of Trillions weekly reviews by becoming a paid subscriber for $5 per month or $50 for a year.)
Last week’s AP-NORC poll found that both political parties are being blamed for the shutdown. Three-quarters of survey respondents believe both parties deserve at least a “moderate” share of blame.
To access the numbers of “furloughed” and “excepted” employees at individual departments and agencies, see our shutdown webpage.
(2) DISTRICT COURT TEMPORARILY BLOCKS LAYOFFS: Trump’s OMB is using the shutdown (illegally) as an excuse to fire thousands of workers and shut down programs established in law.
President Trump Is Using Attempted Mass Layoffs to Pressure Democrats: On Friday, October 10, the Trump Administration announced the layoff of more than 4000 federal employees, in conjunction with the shutdown, from the following departments and agencies: Commerce, Education, Energy, EPA, HHS, HUD, DHS, and Treasury.
Employee unions filed suit against OMB (AFGE, AFSCME v. OMB / Vought) alleging the firings are “arbitrary and capricious,” in violation of the Administrative Procedure Act.
Court Issues Restraining Order: On Wednesday, October 15, U.S. District Judge Susan Illston in San Francisco issued a temporary restraining order blocking the federal government from carrying out the layoffs or issuing new RIF notices while the shutdown continues. She said the Trump administration had “taken advantage of the lapse in government spending and government functioning to assume that all bets are off, the laws don’t apply to them anymore, and they can impose the structures that they like on the government situation that they don’t like.”
On Friday, the District Court expanded the restraining order to cover employees represented by unions other than the original two plaintiffs in the suit.
OMB has delayed the firings in compliance with the court order.
(3) TARIFFS AND THE ECONOMY:
Inflation: Last week, the Labor Department warned that the Trump administration’s mass deportation efforts could cause an uptick in food prices amid a decrease in labor and an increase in demand for fresh produce; the Intelligencer reported on rising grocery prices; and the Washington Post reported on why car insurance prices keep climbing.
Jobs Anxiety: An AP-NORC poll reports that Americans are growing increasingly concerned about their ability to find a good job amidst hiring freezes and elevated inflation. But in a piece of good news, one U.S. company, Provalus, is bringing to rural America jobs that often go overseas.
The “K Economy”: CNBC reported last week on the “shocking disparity between how high-income and low-income earners feel about the economy.”
Trump’s Anti-Free Market Interventionism: In a stunning departure from traditional Republican opposition to government intervention in the economy, Treasury Secretary Bessent said last week the Administration will set price floors across strategic industries and take equity stakes in more companies in order to compete against nonmarket economies like China.
China-U.S. Trade War: Columnist Hal Brands argues in Bloomberg that “China is already winning the trade war America wanted,” and Fareed Zakaria argues in the Washington Post that “Trump’s approach to Middle East diplomacy won’t work with China.” Also last week, the World Trade Organization urged the U.S. and China to de-escalate the trade war or risk long-term damage to global growth, and Reuters reported that Trump’s tariff rollercoaster is prompting some Chinese exporters to “give up” on the U.S. market.
(4) OTHER MAJOR DEVELOPMENTS ACROSS GOVERNMENT:
Shifting Disaster Response to Financially Strapped States: NY Times reports that Donald Trump’s FEMA is forcing disaster-struck towns to fend for themselves.
Chaos at NIH: STAT news reports that “former National Institutes of Health leaders lament constant chaos at the agency and caution it’s not over.”
Sinking a Maritime Carbon Tax: CNN reported last week that the Trump Administration helped to sink the world’s first global (maritime) carbon tax after threatening sanctions against countries supporting it.
Rural Health Fund – Money without a Plan: In order to get Trump’s July budget bill across the finish line, congressional leaders added a last-minute $50 billion rural health fund to blunt criticism that the nearly trillion dollars in cuts to Medicaid would hurt rural health clinics. In an analysis of the Fund, KFF Health News says RFK Jr. is missing the mark.
Affordable Care Act: Washington Post reports on who will lose out when Affordable Care Act enhanced health insurance subsidies expire at year’s end. In a related story, the New York Times reports that most Americans who rely on the ACA live in Republican areas.
Freedom of the Press: Last Wednesday, dozens of reporters turned in access badges and exited the Pentagon rather than agree to restrictions imposed by Secretary of Defense Hegseth.
“No Kings” Protests on Saturday challenged the silence of Congress’s majority party as the country slides toward autocracy and programs are illegally shuttered throughout government. Read coverage by: WP | Reuters | WSJ | AP
Wall Street Journal reports on Trump team plans to use the IRS criminal investigations unit to pursue a list of “left-leaning groups” and major Democratic donors.”
Ethics Issues: A Financial Times investigation published last week found that Donald Trump and his family’s crypto businesses reaped more than $1billion in pre-tax profits over the past year, in part due to the boom fueled by the Administration’s industry-friendly policies; and the Wall Street Journal reported that Trump organization business partners in India have been accused of fraud and money laundering.
(5) THIS WEEK’S MUST READS:
Congress is losing its grip on the power to spend Americans’ money. – WP
Trump’s approach to Middle East diplomacy won’t work with China – Zakaria
The GOP traditionally stood for rule of law, limited government and unity. It should again. – WSJ / Former Senator Jack Danforth
By failing to stop OMB’s “pocket rescission” of appropriated funds, the Supreme Court has effectively overruled Clinton v. City of New York, the 1998 case the struck down the Line Item Veto Act. - SCOTUSblog
About the author: Charles S. Konigsberg, J.D., served as Assistant Director at the White House Office of Management and Budget for three successive Budget Directors; General Counsel at the U.S. Senate Finance Committee; Minority Chief Counsel at the U.S. Senate Rules Committee; Staff Attorney at the U.S. Senate Budget Committee; Director of Congressional Affairs at CFPB and AmeriCorps; and Staff Director of a national bipartisan budget task force.
He is author of the book, Trillions: A Primer on Federal Spending, Taxes, the U.S. Debt Ceiling, and Fiscal Law. Click here to purchase.
He is also Publisher of:
Appropriations.com which tracks the 12 appropriation bills, government shutdown, and presidential impoundment developments each day;
andGovBudget.com which tracks major developments, by subject area, each day including: Law & Democracy | Cut Tracker | WH-OMB-DOGE | Economic News | Federal Taxes | Tariffs | Health and Human Services Programs | Debt, Deficits and Debt Limit | Discretionary Spending Programs | Mandatory Spending Programs | Immigration | Disabilities Programs | Defense | Climate/Energy | Budget Process
Speaking engagements and press interviews can be scheduled by calling: (202) 818-8578 or (301) 509-5688. Email comments, suggestions, and questions to: ckonigsberg@capitolpublicpolicy.com.