Shutdown showdown: A glossary

Explaining the confusing fiscal terminology at the heart of America's political quagmire

Congressional Democrats and Republicans have engaged in a prolonged legislative deadlock
Jason Reed/Reuters

Debates over taxation and  government spending have long been at the heart of the political conversation in Washington, but rising partisanship have raised the stakes in recent years as the federal government stepped away from the "fiscal cliff" towards the "sequester", always inching towards the "debt ceiling".

Democrats and Republicans can't agree on which programs to fund and which to cut in order to balance the budget, which is why fiscal year 2013 closed with a familiar showdown, this time ending in a federal shutdown.

Al Jazeera explains the terminology that peppers the debate.

Shutdown - A fiscal situation created by a failure of the Senate, the House of Representatives and the president to agree on budget approporiations necessary to fund all but the "essential" activities and employees of government.  

The federal government has shut down 17 times since 1976, but not once since 1996 – when a showdown between President Bill Clinton and congressional Republicans lasted 21 days, longer than any of the shutdowns during the previous two decades. Among other government sectors, visa processing and the National Institutes of Health closed completely.

When lacking the required appropriations, the government immediately cuts back on funding at the start of a fiscal year -- October 1.

Congress came close to forcing a shutdown most recently in April 2011, but at the last minute avoided a move that would furlough 800,000 out of 2 million civilian federal employees.

Essential employees - According to the Office of Management and Budget, on Tuesday some federal employees will be temporarily suspended without pay, while  staff whose work is deemed essential will be kept on the job. At agencies such as the Environmental Protection Agency and NASA, more than nine out of ten workers will be forced to stay home – although International Space Station scientists will still be working.

National parks and passport offices usually close during shutdowns. However, members of Congress are paid as usual, and mail delivery is not impacted. Nonmilitary employees of the federal government can be furloughed, but military staff cannot. Instead, their pay can be delayed.

About half of the employees at the Department of Defense and Health and Human Services will be at work. In the Department of Transportation, air traffic controllers are deemed essential. At the Department of Commerce, meteorologists will continue to be on duty. Some of the other employees who will continue to work: nuclear submarine engineers at the Department of Energy; drug enforcement agents at the Department of Justice; money printers at the Department of the Treasury; and Secret Service agents at the Department of Homeland Security.

Only 4 percent of the Department of Veterans Affairs’ 332,025 staff members are furloughed, as nurses and doctors at federal hospitals continue to work. Actuaries at the Social Security Administration and many IRS workers will likely be sent home. The FBI, Border Patrol and Coast Guard will not be affected.

Debt ceiling - Also known as the debt limit, this mechanism dating back to 1917 is used to cap the amount of money the government can borrow by selling Treasury bonds. The Treasury can, however, resort to "extraordinary measures" to provide stopgap funding.

After an intense fight over proposed deficit-reduction measures, the Budget Control Act of 2011 (BCA) resolved the crisis temporarily on Aug. 2 of that year with an immediate $400 billion increase in the debt ceiling and further mechanisms for up to $2 trillion in additional increases.

The bill extended government funding through the end of 2012, at which point Congress forestalled the fiscal cliff by passing the American Taxpayer Relief Act. The ceiling of $16.7 trillion was surpassed in mid-May 2013, when the Treasury began borrowing from federal employee retirement funds to pay the country's bills. That tactic continued for several months.

Default - A sovereign default would result from the U.S. Treasury being unable to pay the interest on its existing debt. It's unclear whether the government could, in that situation, prioritize servicing its debt over other obligations  in order to prevent financial crisis and potential massive contraction of the economy.

In Aug. 2011, the U.S. came close to deafulting as a result of a delay in Congress raising the debt ceiling. The consequence was a downgrade in the  U.S. credit rating, raising the cost of borrowing and causing a plunge in stock prices. 

Treasury Secretary Jack Lew has said emergency borrowing measures would last until around Oct. 17, 2013. House Republicans are demanding a series of concessions before granting budget authority to the Treasury to extend spending for another year. They would like to delay the implementation of Barack Obama’s signature legislative achievement, the Affordable Care Act. The president says he will not negotiate over debt for which Congress is responsible.

Sequester - Generic term for automatic cuts in discretionary spending. In 2013, "the sequester" refers  to the section of the BCA which would have gone into effect on Jan. 1 of this year – but was postponed for two months by ATRA. The sequester necessitates more than $40 billion in federal spending cuts this year, and more than double that amount in 2014.

Although Social Security, Medicaid, federal pensions and veterans' benefits are exempt, the cuts are divided evenly between defense and nondefense spending. The total $1.1 trillion in slashed spending would amount to a 10 percent decrease in defense expenditures starting in 2013 – yielding $454 billion in savings over eight years. The sequester also requires reductions in Medicare spending by 2 percent each year. However, food stamps and welfare programs are excluded.

Fiscal cliff - Refers to the simultaneous and automatic enactment of steep budget cuts and tax increases that were mandated for the end of 2012 by previously passed bills. The U.S. budget deficit would have been halved in 2013 if the cliff had not been averted. But, mild recession and higher employment were inevitable, according to predictions by the Congressional Budget Office (CBO) – as Bush-era tax cuts expired and spending was rolled back.

After months of political deadlock and media buildup, Congress passed ATRA on the last day of 2012. Although this bill resolved the immediate problem through a political compromise of limited tax increases and a variety of spending decreases, government funding was only guaranteed for another two months, until about early March.

Austerity - A combination of budget cuts and tax increases that serve to decrease deficits during times of economic malaise. Reduction in government spending often causes a rise in unemployment and lower economic growth. After the implementation of unprecedented belt-tightening in Europe, unemployment and debt-to-GDP ratios there have hit historic highs.

The deficit as a percentage of GDP is expected to fall to 5.3 percent in 2013, down from 7 percent in 2012. Thus, the budget may indeed become healthier, even as ordinary Americans pay the price of tighter fiscal policy.

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