Kalshi now pegs the odds of a U.S. government shutdown tomorrow at 85%, the highest level yet.
The United States government is on the brink of a shutdown at midnight Tuesday, with Democrats and Republicans in Congress locked in a bitter funding dispute that could grind federal operations to a halt and suspend the pay of nearly a million government workers. Unless a short-term spending bill is passed, federal agencies will begin closing at 12:01 a.m. Wednesday (04:01 GMT), triggering widespread disruption to services and potentially delivering a blow to the fragile U.S. economy.
The new fiscal year begins on October 1, but lawmakers have yet to agree on a funding measure to keep the government open. Republicans, who control both chambers of Congress, have introduced a stopgap bill funding operations until November 21. However, Democrats refuse to back it unless it restores funding for the Affordable Care Act (Obamacare) and reverses Medicaid cuts enacted under President Donald Trump’s controversial “One Big Beautiful Bill” in July.
Democrats also want to extend health insurance tax credits, which are set to expire later this year. Senate Democrats have floated alternatives, including short one-week extensions, but Republicans have rejected every compromise.
Senate: Republicans hold 53 seats; Democrats, 47. However, 60 votes are needed to pass legislation.
House of Representatives: Republicans hold 220 seats; Democrats, 212. Speaker
Mike Johnson and Majority Leader Steve Scalise have stood firm against Democratic demands, while Minority Leader Hakeem Jeffries and Senate Minority Leader Chuck Schumer accuse Republicans of sabotaging healthcare protections.
With negotiations stalled, President Trump abruptly cancelled talks with Democratic leaders, dismissing their proposals as “unserious.”
The crisis deepened when Trump posted an AI-generated “deepfake” video on Truth Social, depicting Schumer and Jeffries in racially charged caricatures. Democrats condemned the video as racist and divisive. “We are fighting to protect the healthcare of the American people in the face of an unprecedented Republican assault,” Jeffries said in response.
If Congress fails to act, agencies must furlough non-essential staff. While past shutdowns ensured furloughed employees eventually received back pay, this time the Trump administration is threatening permanent layoffs. The Office of Management and Budget (OMB) has already instructed agencies to submit reduction plans, a dramatic escalation from past shutdown playbooks.
According to political analyst John Owens, nearly 900,000 federal workers could lose their jobs. Essential employees such as the military, FBI, CIA, and air traffic controllers would remain on duty but without pay until operations resume. Programs like Social Security and Medicare would continue unaffected, while the U.S. Postal Service would remain operational.
A shutdown would delay critical government reports, including the monthly jobs report due Friday and key inflation data in mid-October. Economists warn that withholding this information could destabilize financial markets at a time when U.S. debt levels are already under scrutiny.
The U.S. has faced multiple shutdowns before:
2018–2019 (Trump’s first term): A 35-day shutdown over border wall funding, the longest in history.
2013 (Obama era): A 16-day shutdown over Republican attempts to block Obamacare.
Multiple shutdowns in the 1970s–1990s under Presidents Carter, Reagan, and Clinton.
What makes this showdown different, experts note, is the Trump administration’s threat of permanent job losses, an unprecedented move designed to put pressure on Democrats.
With midterm elections looming in November 2026, vulnerable Republicans face pressure from constituents angry about healthcare cuts, while Trump’s hard-right base demands adherence to his fiscal vision. Owens noted:
“The outcome depends on whether Trump and congressional Democrats can find compromise. Otherwise, the U.S. risks entering one of the most disruptive shutdowns in its modern history.”Meanwhile, prediction markets reflect growing pessimism: Polymarket on Tuesday placed the odds of a shutdown at 86%.
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