The Government Shutdown Cost The Economy $11 Billion

Alex WongGetty Image

On Monday, a new report from the nonpartisan Congressional Budget Office stated that the partial government shutdown cost the American economy a staggering $11 billion. This money includes reduced demand, delayed government spending, and lost work from furloughed federal workers.

According to CNBC, most of the damage done economically will be reversed, as the government is now back up and running — and employees can once again return to work. However, $3 billion has been permanently lost as a result of the shutdown. This adds up to about 0.1 percent of the economic activity of the fourth quarter of 2018.

“Among those who experienced the largest and most direct negative effects are federal workers who faced delayed compensation and private-sector entities that lost business,” the report stated. “Some of those private-sector entities will never recoup that lost income.”

The report also indicates that the economic impact of the shutdown only increased in severity as it progressed. Business owners put off hiring new employees, giving raises, and even making investments as the partial government shutdown continued on. The shutdown’s impact on the first quarter of 2019 was $8 billion, which comes in at 0.2% of the GDP.

It should be noted that the report does not tabulate how the federal government shutdown indirectly impacted the economy. Some tertiary fallout included reduced access to loans, lack of access to numerous government financial resources, and a halt of certain federal permits.

Loading...

The report was requested last week by Democratic representatives from Arizona and Kentucky. Their goal, they said in a statement, was to raise awareness about the financial impact of government shutdowns, and the consequences of choosing this course of action.

The CBO report also indicates that the economy will slow in growth this year, in no small part due to the partial government shutdown. Economic growth is projected to drop to 2.3%, as opposed to the 3.1% of 2018. The CBO projects that the benefits of the new tax laws will also not make as dramatic an impact on the economy as they did last year — which is another major factor in the slowed economy growth. Should things continue along this vein, the CBO estimates that growth will average at 1.7% until 2023. This is well below the economy’s potential growth, according to the report.

White House officials have already stated that Donald Trump would have no problem with initiating a second government shutdown if he does not get the $5.7 billion in funding he needs for the border wall between the United States and Mexico. The government shutdown could resume on February 15 if a compromise on border security cannot be reached. Democrats have said they are willing to invest in added border security, provided it does not include the controversial wall or barrier.