Jan 28, 2019

The government shutdown offset the boost from Trump's tax cuts

President Trump announced he will sign a bill to reopen the government until Feb. 15. Photo: Brendan Smialowski/AFP/Getty Images

According to the White House's projections, the government shutdown that ended Friday had already eroded the positive impact of tax reform and spending increases signed by Trump in 2017.

What they're saying: "Chairman of the Council of Economic Advisers Kevin Hassett recently said the shutdown reduces quarterly annualized economic growth by 0.13 percentage points for every week that it lasts. After more than four weeks, that’s the equivalent of a 0.6 percent reduction in the annualized growth rate," the Committee for a Responsible Federal Budget notes.

  • "The deficit-financed nature of these bills provided significant short-term stimulus, though they will do little to boost GDP over the medium and long terms. CBO estimates suggest they will each increase GDP growth by 0.3 percent per year in 2018 and 2019."
  • "At best, some of the economic losses from the shutdown may be recovered."

Hassett asserted last week that "the second quarter would be humongous if the government reopens" and could regain much of its lost growth, even though government output remains lost for the quarter.

Why it matters: Much, but not all, of the growth would be recovered after the government reopens.

  • As one economic analyst explained via email, "The restaurant meals not eaten still represent a permanent loss (not to mention the spending by federal contractors who are not getting backpay)."
  • "Some but not all of the economic effects will bounce back — federal workers will make their missed mortgage/car payments, but they’re not going to go out to eat 10 times this week to make up for the times they didn’t go out last week."

Of note: Economists polled by Reuters estimate the shutdown, which started on Dec. 22, actually knocked 0.2% off of quarterly GDP growth every week, double the White House's estimate.

Go deeper: Stocks are bouncing back, but analysts are still spooked

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Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 3 p.m. ET: 1,407,123— Total deaths: 80,759 — Total recoveries: 297,934Map.
  2. U.S.: Total confirmed cases as of 3 p.m. ET: 383,256 — Total deaths: 12,021 — Total recoveries: 20,191Map.
  3. Trump admin latest: Trump removes watchdog overseeing rollout of $2 trillion coronavirus bill.
  4. Federal government latest: Senate looks to increase coronavirus relief for small businesses this week — Testing capacity is still lagging far behind demand.
  5. World update: China reopens Wuhan after 10-week coronavirus lockdown.
  6. Environment latest: Coronavirus patients in more polluted parts of the U.S. are more likely to die from the illness than those in cleaner areas, according to a new Harvard University analysis.
  7. What should I do? Pets, moving and personal health. Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

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Pelosi calls for removal of acting Navy secretary

Photo: Chip Somodevilla/Getty Images)

House Speaker Nancy Pelosi on Tuesday called for the firing or resignation of acting Navy Secretary Thomas Modly, following his decision to relieve Capt. Brett Crozier from his command of the USS Theodore Roosevelt last week.

Why it matters: Pelosi said Modly "showed a serious lack of the sound judgment and strong leadership" in firing Crozier, who wrote a letter pleading for help in battling a coronavirus outbreak onboard the ship. The letter was leaked to the press, leading to Crozier's ouster.

Schiff demands that Grenell explain Trump's purge of inspectors general

House Intelligence Chairman Adam Schiff. Photo: Zach Gibson/Getty Images

Rep. Adam Schiff (D-Calif.), the chairman of the House Intelligence Committee, sent a letter to the acting Director of National Intelligence Ric Grenell on Tuesday demanding he turn over documents explaining his management of the intelligence community amid concerns of the politicization of the agency.

Why it matters: The letter, which calls for a response by April 16, comes as President Trump continues his purge of inspectors general across the federal government that he deems disloyal to his administration.