Economy could lose $14 billion from prolonged government shutdown, CBO warns
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Between $7 billion and $14 billion in U.S. gross domestic product will not be recovered after the government shutdown, the Congressional Budget Office estimated in a Wednesday report.
Why it matters: Government shutdowns don't typically affect the country's broader financial health, but the ongoing standoff between Democrats and Republicans and Trump's unilateral spending moves during the funding gap add extra uncertainty to the economic picture.
Driving the news: Most of the decline in real GDP will be recovered eventually, but the "effects of the shutdown on the economy are uncertain," CBO director Phillip Swagel wrote in the analysis.
- Negative effects will "intensify" the longer the shutdown lasts, Swagel said in the report requested by Rep. Jodey Arrington (R-Texas).
By the numbers: The shutdown will temporarily lower GDP growth by 1 to 2 percentage points, the CBO calculated.
- If the shutdown ends after four weeks total, the permanent GDP loss would be $7 billion.
- The loss is estimated at $11 billion with a six-week shutdown and $14 billion with an eight-week shutdown.
Our thought bubble, from Axios economics reporter Courtenay Brown: The CBO estimates that as much as $14 billion worth of economic activity might never be recovered, an amount that is fairly small in the context of the $30 trillion U.S. economy.
- But the CBO's analysis focuses on the effects on aggregate economic indicators that will not capture any short-term hardships felt by Americans who might be missing paychecks or losing SNAP — even if they are eventually made whole.
Zoom out: If furloughed government employees were are counted as unemployed on temporary layoff in October, then the unemployment rate for the month would be 0.4 percentage points higher, the CBO report said.
Read the full CBO analysis:
Go deeper: Reality check on shutdown economics
