Government shutdown cost US economy $3B in permanent losses: CBO
The record-setting government shutdown that paralyzed key institutions for weeks came with a hefty price tag, according to a report by the Congressional Budget Office released Monday.
The 35-day shutdown, which arose as a result of a dispute over funding for a U.S.-Mexico border wall favored by President Trump, will cost the U.S. economy $11 billion, according to the CBO’s report. That total includes $3 billion in lost economic activity during the fourth quarter of 2018 and a further $8 billion in the first quarter of 2019.
The lost economic activity equaled 0.1 percent of real gross domestic product (GDP) in the fourth quarter and 0.2 of real GPD in the first quarter of 2019. While the CBO estimated that the U.S. economy will recover $8 billion as business activity resumes and workers are paid, some $3 billion in lost economic activity will never be recovered.
“In CBO’s estimation, the shutdown dampened economic activity mainly because of the loss of furloughed federal workers’ contribution to GDP, the delay in federal spending on goods and services, and the reduction in aggregate demand (which thereby dampened private-sector activity),” the report said.
President Trump agreed to back a temporary deal that would fund the government for three weeks while Congressional leaders on both sides of the aisle negotiate a border security package. Trump, who had sought more than $5 billion in funding for a border wall, has threatened to shut down the government again if no deal is reached.
The CBO noted that its report did not include the financial impact of some side effects of the shutdown, such as a reduced access to loans or businesses who were unable to obtain federal permits because key government agencies were closed.
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The report estimated that roughly 800,000 federal workers went without pay during the shutdown.