A government shutdown will reduce U.S. GDP in the first quarter of 2018 by upwards of 0.2%—or $6.5 billion—each week it continues, according to Beth Ann Bovino, chief U.S. economist for S&P Global Ratings.
Why it's so costly: Roughly half of the hit results from the lost production of non-essential government workers.
- After previous shutdowns, Congress has agreed to repay furloughed workers for their lost wages, but the economy did not regain their lost productivity since they were barred from working while the government was closed.
Indirect costs: A shutdown will affect more than just government employees and agencies, Bovino warns.
- Private contractors who rely on government spending will also be affected. Though they will eventually recover that lost business, they "are going to push off some of their investment ideas or investment plans until they get more certainty," she says.
- According to a National Association of Government Contractors survey following the 2013 shutdown, 29% of such companies delayed hiring as a result, and it negatively affected 58% of them.
- Bovino said the closing of national parks and monuments hurts local businesses that rely on tourist traffic.
A higher deficit: Government shutdowns make running the government more expensive. The Office of Management and Budget estimates that the 2013 shutdown raised the budget deficit by at least $2 billion, due to the added costs of stopping and starting government programs.
