Each year Congress passes, and the President signs into law, 12 appropriations bills to fund the government for that fiscal year. If Congress fails to pass and sign these, a government shutdown occurs. This forces non-essential activities to cease, and many federal employees are furloughed. Essential services like food inspections, terrorism monitoring, and air traffic control continue to operate; however, other services such as passport processing, issuing business loans and grants, maintaining national parks, and even regulating the safety of medical drugs and medical devices are temporarily suspended.
Each agency determines its own plan, often based on previous shutdown guidance, but most non-essential activities stop and hundreds of thousands of workers are not paid during a shutdown. The longer a shutdown continues, the greater the economic impact. A recent study by the Congressional Budget Office (CBO) found that the 2018-2019 shutdown reduced GDP by $11 billion, with $3 billion of those losses never recovered.
The courts and Congress are not affected during a shutdown because of a 1981 legal opinion by Attorney General Benjamin Civiletti. The same logic applies to presidentially appointed and Senate confirmed members of the Cabinet.
For example, a Congressional Budget Office report from the last shutdown found that two major Small Business Administration loan programs were halted during the duration of the shutdown. This reduced the ability of small businesses to access $200 million per day in funding and may have hindered future investment and hiring decisions. Social Security and Medicare beneficiaries will receive their checks during a shutdown, but services such as benefit verification and new card issuance will stop. Call centers will be closed and customer service wait times will increase.