Government Shutdown Cost U.S. Economy $3 Billion: CBO Report

Federal workers and private-sector entities were hit the hardest, according to the Congressional Budget Office.

The U.S. economy will likely never recover $3 billion lost during the five-week partial government shutdown, according to a report released by the Congressional Budget Office on Monday.

The 35-day shutdown ― the longest such closure in U.S. history ― reportedly reduced GDP in the fourth quarter of 2018 by $3 billion and an additional estimated $8 billion in the first quarter of 2019 in relation to what it would have been otherwise.

A substantial portion of GDP lost during the budget impasse is expected to be recovered, but roughly $3 billion will be lost forever, the CBO estimated.

Over 800,000 federal employees were furloughed or, if deemed essential, continued to work without pay during the shutdown. It’s estimated that hundreds of thousands if not millions of government-contracted workers were also affected. Though federal employees are expected to receive back pay, contracted employees likely will not.

“Underlying those effects on the overall economy are much more significant effects on individual businesses and workers,” the CBO report stated. “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. Some of those private-sector entities will never recoup that lost income.”

Union members and other federal employees protest the government shutdown on Capitol Hill in Washington, Thursday, Jan. 10, 2
Union members and other federal employees protest the government shutdown on Capitol Hill in Washington, Thursday, Jan. 10, 2019.

National Economic Council Director Larry Kudlow on Monday said he disagrees with the CBO’s assessment of the shutdown’s economic impacts, though did not provide any specific numbers.

“We frequently disagree with CBO,” Kudlow said during a White House press briefing. “With all respect, they’re doing the best job they can. I get that. No, I won’t acknowledge any of that right now.”

He added, “I think you have just a whole bunch of very temporary factors and now that the government has reopened, the switch goes right back on. There’s certainly no permanent damage to the economy.”

President Donald Trump on Friday announced a deal with congressional leaders to reopen the government for at least three weeks while lawmakers debate funding for his long-promised wall along the U.S.-Mexico border. Democrats have steadfastly refused to support a spending bill that would include $5.7 billion toward the wall, which he repeatedly vowed Mexico would pay for.

The government fully reopened again on Monday, though the president has pledged to the shut it down again or declare a national emergency to secure funds for the wall if Democrats don’t cave to his demands by Feb. 15. 

House Budget Committee Chairman John Yarmuth (D-Ky.) said the CBO’s report confirmed the shutdown had “a debilitating effect on our entire economy.”

“If it were to resume in three weeks, millions of Americans would again share the pain of the 800,000 workers who spent the past month without a paycheck,” he said in a statement Monday. “This CBO estimate serves as a stark warning to President Trump on the consequences of using American workers as a bargaining chip.” 

Private estimates of the economic impact of a 16-day shutdown in 2013 put the economic damage at $20 billion or more, though that funding lapse affected more agencies.

This story has been updated with Kudlow’s comments.