☕ The shutdown is here

Good morning!

It’s all about the federal government shutdown today - a dense, complex and ongoing story.

So if that’s feeling like a lot to get across, just remember that Alaskan Brown Bear ‘32 Chuck’ has been named the winner of Fat Bear Week after two years as runner-up.

I’ve got 30 seconds

Some headlines from this morning:

• Up to 69 people have been killed and hundreds injured after a 6.9 magnitude earthquake struck off the coast of the Philippine province of Cebu last night (local time). Cebu’s government declared a state of emergency, with rescue efforts hindered by power outages and up to 611 aftershocks. The town of Bogo was the hardest hit civilian centre, with almost all 90,000 residents impacted. Government and emergency services officials have issued public calls for medical volunteers on social media, as local hospitals are overwhelmed. The Philippines is one of the world’s most disaster-prone countries due to its unique location on the Pacific’s ‘Ring of Fire’, a name given to an arc of fault lines off the country’s coast.

• Researchers have developed a human egg using skin cells, in what’s been described as a landmark fertility breakthrough. The team behind the discovery at Oregon Health & Science University said they’ve “achieved something that was thought to be impossible”. According to findings published in the journal Nature, the technique mimics cloning technology pioneered in the 1990s, which led to the world-renowned birth of Dolly the sheep. This process involves transplanting a skin cell nucleus into a donor egg that has been stripped of its own nucleus. While several more years of research will be required to perfect the process, the study’s co-author, Paula Amat, said it offers hope to millions of people with infertility due to a lack of eggs or sperm, and allows “for the possibility of same-sex couples to have a child genetically related to both partners.”

• A federal judge has rejected Sean "Diddy" Combs' request to overturn his prostitution-related convictions, ahead of his sentencing on Friday. Combs was found guilty of two counts of transportation to engage in prostitution under the Mann Act, a 1910 federal law that outlaws transporting people across state lines for "immoral purposes." The Bad Boy Records founder was acquitted of more serious charges, including racketeering and sex trafficking, which could have resulted in a life sentence. Each prostitution charge carries a maximum sentence of 10 years in prison.

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Pharmaceutical giant Pfizer will provide the majority of its primary medicines at lower prices under a deal struck with the Trump administration yesterday. It comes a week after the President imposed 100% tariffs on imports of branded and patented medicines.

The medications will be available directly to consumers via a website called TrumpRx.com, scheduled to launch in 2026.

What’s in the deal?

The agreement secures "most-favoured nations prices" for Pfizer's products—prices in line with those offered in other developed countries. A government spokesperson told reporters the deal will slash the price of some drugs by 85% if bought from TrumpRx.com. In return, Pfizer will be exempted from Trump tariffs.

Pfizer said the deal will involve most primary medications but did not specify which drugs are included. The agreement also covers prescription drugs for state-run Medicaid and includes a $70 billion investment in U.S. manufacturing, development, and research.

How did we get here?

Last week, a 60-day deadline imposed by President Trump via a letter to 17 pharmaceutical companies expired. The letter demanded that drug manufacturers enter into a deal with the U.S. government to lower the prices offered to U.S. citizens.

Pfizer is the first and only company to reach a deal so far, but President Trump said he expects more to follow. The deal comes a week after President Trump imposed 100% tariffs on all imported drugs to pressure pharmaceutical companies to manufacture drugs in the U.S.

The response

President Trump praised the deal, saying, "It's going to have a huge impact on bringing Medicaid costs down”.

Pfizer executives said the deal ensures fair prices for Americans. "I think today we are turning the tide, and we are reversing an unfair situation," they said, referring to U.S. drug prices funding research and development for the rest of the world, which mostly receives drugs at cheaper prices.

Some question whether the deals will make a significant difference in pricing, given that insurance companies and other intermediaries also influence drug prices.

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The U.S. government shut down at midnight on October 1 after Congress failed to pass a stopgap funding bill. Non-essential federal workers are furloughed without pay as Republicans and Democrats blame each other for the impasse.

It's the 21st shutdown since 1977, and there's no clear timeline for when it will end. Here's what you need to know.

What caused the shutdown?

The Republican-controlled House passed a Continuing Resolution in September that would extend government funding until November 21. The bill stalled in the Senate, where Republicans need 60 votes to pass legislation but hold only 54 seats.

President Trump met with Democratic and Republican leaders at the White House on Monday to negotiate Democratic cooperation on the CR. The meeting failed to produce an agreement, and the bill did not pass. Without the funding measure, approximately 25% of federal operations shut down at midnight.

What happens during a shutdown?

As many as 4 million federal government employees can go without pay during a shutdown. Members of Congress will continue to receive their salaries, as mandated by the U.S. Constitution.

Hundreds of thousands of workers are deemed "essential" and told to continue working without the possibility of a paycheck. These workers include airport security, air traffic controllers, and some members of the military, including National Guard troops currently deployed in Washington D.C.

President Trump has also promised to carry out mass, "irreversible" firings during the shutdown. The Office of Management and Budget instructed the heads of government agencies to prepare for staff layoffs in a memo, although it is unclear how this will be implemented.

The cost of past shutdowns

There have been 20 government shutdowns since 1977, including this one. The longest in history was 35 days and occurred during President Trump's first term in 2018. During that shutdown, the U.S. economy lost over $3 billion in economic activity that was never recovered.

During long government shutdowns, federal employees and military service members have been forced to rely on food banks and have been unable to afford the gas to commute to work if they were deemed essential workers.

Political standoff

Republicans and Democrats remain deeply divided over the funding bill. Republicans claim Democrats want to include a funding measure in the CR that provides health care to undocumented immigrants. A video posted by the Republican Conference on X claims Democrats are "putting illegal aliens first and hurting hardworking Americans in the process."

Democrats claim they are trying to ensure health care subsidies for low-income families are included in the CR.

What’s next?

Negotiations will continue behind closed doors. Financial markets have not recorded any drastic change, meaning Wall Street believes the shutdown will be short-lived. The shutdown will end once Senate Democrats and Republicans agree on a Continuing Resolution that funds the government.

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