C.B.O. Estimates Shutdown Cost Economy $11 Billion Over Five Weeks

The economic impact from the just-concluded government shutdown was apparently quite substantial.

Yesterday I noted that Standard & Poors had estimated that the recently-concluded government shutdown had cost the economy some $6 billion. This morning, the Congressional Budget Office estimated that the costs were much higher and that a good part of that loss will never be recovered:

WASHINGTON — The five-week federal government shutdown cost the United States economy $11 billion, with nearly a quarter of that total permanently lost, the Congressional Budget Office said on Monday.

The nonpartisan C.B.O. said that the shutdown, which started in late December and ended last Friday, delayed $18 billion in spending by federal workers. That is expected to reduce 2018 fourth quarter gross domestic product by $3 billion and cut first quarter growth this year by $8 billion, or 0.2 percent.

The C.B.O. said that growth in subsequent quarters will be higher as that delayed spending takes place and filters through the economy. However, it estimates that $3 billion will never be recovered.

The most direct hit to the economy came from the loss of spending by furloughed workers, as well as the delay in federal spending on goods and services and reduced aggregate demand, C.B.O. said.

But the economy also suffered “more indirect negative effects,” which are harder to quantify but stemmed from businesses being unable to obtain permits and certifications and reduced access to federal-backed loans.

“Such factors were probably beginning to lead firms to postpone investment and hiring decisions,” C.B.O. said.

One of the things this likely means is that the major economic indicators for the first quarter, including the January jobs report due out on Friday and other reports, are likely to point to much weaker numbers than anticipated. Additionally, the shutdown itself will likely have a negative impact on First Quarter growth, which generally tends to be slower than economic growth during the rest of the year for seasonal reasons. Additionally, while the shutdown is over for now the White House isn’t ruling out the possibility that we could see another shutdown after February 15th. While Congress is likely to resist this, and Senate Republicans may actually rebel if the White House pulls that stunt again, the uncertainty that this creates for Federal contracts and businesses that rely on secondary business that comes from Federal workers or contractors is likely to hamper economic activity until there is some assurance that there won’t be another shutdown. Add to this the fact that forcing another shutdown over the wall would seem to be politically stupid on Trump’s part and one would think that he’ll know better. But then, of course, this is Donald Trump we’re talking about so one never knows.

FILED UNDER: Borders and Immigration, Congress, Deficit and Debt, Donald Trump, Economics and Business, Politicians, US Politics, ,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. CSK says:

    Yesterday Mulvaney said that an executive order is possible. Today he’s saying a shutdown is possible. Who knows? It really depends on what the last person to goad/taunt/flatter Trump says to him before he makes up what passes for his mind at the last minute.

  2. Kylopod says:

    There once was a moron from Queens
    Who bragged about having great genes
    While stroking his base
    He fell flat on his face
    Now they see through his tired routines

    12
  3. Slugger says:

    Let’s say there were 5000 people in that caravan we were all dreading. If we gave each of them $100,000 to stay home, it would cost half a billion dollars. We’d come out way ahead!

  4. DrDaveT says:

    The C.B.O. said that growth in subsequent quarters will be higher as that delayed spending takes place and filters through the economy. However, it estimates that $3 billion will never be recovered.

    Is that $3B of the $8B, or $3B of the $11B? Either way, the result is that the cost to the economy was either $3B or $6B — not $11B — plus some small amount of interest on the remainder for the delay. If you get it back almost immediately, it wasn’t really a ‘cost’.

    I really wish newspapers would hire at least some editors who hadn’t failed out of pre-algebra.

  5. Michael Reynolds says:

    Yeah but it was all worth it because we now have a big, beautiful wall! MAGA!

  6. An Interested Party says:

    It’s hardly surprising that someone who spilled red ink all over the federal budget to give tax cuts to rich people who don’t need them would also damage the economy by being stubborn over a stupid idea…maybe he thinks the whole country can claim bankruptcy just like he repeatedly did…