A government shutdown looms after Republicans in Congress failed on Thursday to pass a pared-down spending bill. The potential shutdown could disrupt Christmas travel and deliver a blow to the US economy just a month before Donald Trump returns to the White House.

Lawmakers face a last-minute scramble to secure a new deal before the Friday midnight deadline – or all nonessential government functions will pause.

Here we answer some key questions about government shutdowns:

What causes a government shutdown?

A US government shutdown occurs when Congress fails to fund the federal government by a specified deadline, in this case 20 December at midnight.

More specifically, the terms of a piece of legislation known as the Antideficiency Act, first passed in 1884, prohibits federal agencies from spending or obligating funds without an act of appropriation – or some alternative form of approval – from Congress.

Congress only announced a stop-gap measure to keep the government open this week. On Tuesday, the House speaker, Mike Johnson, unveiled a bipartisan agreement that would have extended government funding until March. It included assistances for farmers, hurricane relief and a small pay raise for for members of Congress.

But Donald Trump and his billionaire ally Elon Musk scuttled that deal, in part by spreading falsehoods about the original plan. Trump called for the suspension – or even elimination – of the federal debt ceiling.

Friday is the final day to approve a new federal budget before a government shutdown would begin.

Can the US still avert a shutdown?

With no clear path forward after the Trump-endorsed proposal failed to pass on Thursday night, the US appears on the verge of a shutdown. But with members of Congress itching to leave Washington for the holidays, and Republicans wary of being blamed for shuttering critical federal operations days before Christmas, there is a strong desire to avoid a protracted shutdown.

“We’re expecting votes this morning, so y’all stay tuned,” Johnson said Friday morning. “We got a plan.”

Asked if he had reached a new agreement, the speaker replied: “We’ll see.”

Both chambers of Congress – the Republican-controlled House and the Democratic-controlled Senate – must approve the measure. Leaders have the ability to fast-track a measure through the legislative process, but with such narrow margins any plan that lacks bipartisan support risks being derailed by a handful of defectors.

Even if a deal is reached by Friday morning, it is possible that funding lapses for a period of hours while Congress approves the legislation and sends it to Joe Biden’s desk for a signature.

What happens when a US government shutdown takes place?

Thousands of federal government employees are put on furlough, meaning that they are told not to report for work and go unpaid for the period of the shutdown. Their salaries are paid retroactively when it ends.

Other government workers who perform what are deemed essential services, such as air traffic controllers and law enforcement officials, continue to work but do not get paid until Congress acts to end the shutdown.

Depending on how long it lasts, national parks can either shut entirely or open without certain vital services such as public toilets or attendants. Passport processing can stop, as can research at national health institutes.

How unusual are US government shutdowns?

For the first 200 years of the US’s existence, they did not happen at all. In recent decades, however, they have become an increasingly regular part of the political landscape, as Washington politics has become more polarized and brinkmanship a commonplace political tool. There have been 20 federal funding gaps since 1976, when the US first shifted the start of its fiscal year to 1 October.

Three shutdowns in particular are notable in US political lore:

• A 21-day partial closure in 1995 over a dispute about spending cuts between Bill Clinton and Newt Gingrich, the Republican speaker, that is widely seen as setting the tone for later partisan congressional struggles

• In 2013, when the government was partially closed for 16 days after another Republican-led Congress tried to use budget negotiations to defund Barack Obama’s signature Affordable Care Act, widely known as Obamacare

• A 34-day shutdown, the longest on record, lasting from December 2018 until January 2019, when Trump refused to sign any appropriations bill that did not include $5.7bn funding for a wall along the US border with Mexico. The closure damaged Trump’s poll ratings

How could a shutdown affect the wider economy?

It depends on how long the shutdown lasts. An hours-long shutdown would likely have minimal impact. But a days-long shutdown during one of the busiest travel seasons of the year could lead to costly delays and disruptions. Meanwhile, Medicare and Medicaid claims could take longer to process and federal employees who are not receiving a paycheck may spend less this holiday season. And, depending on the severity of the shutdown and the political fallout it causes, it could send the stock market into turmoil.