It’s estimated that between 800,000 and 1 million of the 2.8 million US federal employees will receive unpaid leave and 1.4 million active-duty military personnel may get late paychecks. NASA will furlough most of its employees. National parks, libraries, and museums have closed, but essential sectors and agencies such as air traffic control, passenger security, federal courts, post offices, and most of the staff of the Department of Homeland Security will continue working.

Deep divisions in the US Congress have devalued the USD. By the market close on October 1, the USD traded on the Tokyo market below 98.16 yen, which was lower than the previous day’s rate of 98.21 yen. The USD has fallen against most major currencies in the Asia-Pacific region, including the Philippine Peso, the Singapore dollar, the Thau baht, and the Indonesian Rupiah.

The partial US government shutdown will have a negative impact on the rest of the world. The Integrated Household Survey (IHS) predicts it will cost the US at least 300 million USD a day in lost economic output. The daily cost of the shutdown is likely to grow if it continues as it depresses confidence and spending by businesses and consumers. The IHS estimates that if the government is closed for 2 weeks, GDP in the 4th quarter will fall 0.5% - 2% if it is closed for a month.

The focus of the struggle is the Obama administration’s health care reform program, called Obamacare by its opponents, which mandates that all Americans must have health insurance before 2014 or pay a fine. At present, approximately 50 million Americans, 16% of the US population, don’t have health insurance. Obamacare is expected to help 32 million people obtain health insurance. A CNBC poll shows that 44% of those surveyed support the healthcare reform, while 38% oppose it.  

Many wealthier Americans and Republicans who oppose Obamacare say it will raise taxes on the American people by approximately 500 billion USD. Some Republicans say they voted for the budget proposal that blocks Obamacare because the program will be a disaster for American workers.

The situation is proving a huge challenge for the Obama administration.

The previous shutdown was in late 1995 and early 1996 when President Bill Clinton and leaders of the two houses disagreed on the budget bill. Part of the federal government was closed for 21 days.

The US is nearing an October 17th deadline for raising the government’s borrowing limit which is now 16.7 trillion USD. If congress does not approve raising the debt limit, the US will go bankrupt at least in theory.