CBO on Economic Costs of a Shutdown

Letter released today:

The effects of a government shutdown on the economy would depend on its extent and duration. For example, CBO reported that the five-week partial shutdown ending in January 2019 delayed discretionary spending for compensation and for purchases of goods and services and suspended some federal services. Once the government reopened, most of the payments were made. At the time, CBO estimated that although most of the real gross
domestic product (GDP; real GDP is adjusted to remove the effects of inflation) that was lost during the fourth quarter of 2018 and the first quarter of 2019 eventually would be recovered, about $3 billion would never be. In its report, CBO projected that amount at 0.02 percent of annual GDP in 2019.

Note that the 2018-19 shutdown under the Trump 1.0 Administration did not incorporate (legally questionable) reductions-in-force threatened by the Administration.

Since RIFs would not necessarily entail compensating payments (who knows?), and would heighten economic uncertainty, a similarly prolonged and extensive shutdown could have a proportionately larger impact.

 

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