The nonpartisan Congressional Budget Office (CBO) has estimated that the partial government shutdown resulted in US$18 billion of federal spending being delayed, which lowered the projected level of real GDP in the first quarter of 2019 by 0.2%.
In a report published 28 January local time, the CBO found that US$11 billion had been lost during the shutdown, but anticipates much of the lost GDP (totalling around US$8 billion) will be recovered now that the government has reopened. This will leave a predicted shortfall of around US$3 billion which is lost for good.
The CBO stressed that its figures were only a projection and warned: “all of the estimated effects and their timing are subject to considerable uncertainty”.
The five-week partial shutdown of the U.S. government will ultimately cost the world’s biggest economy $3 billion https://t.co/5JMTsZA3Ng
— TIME (@TIME) January 28, 2019
Businesses and individuals providing contracted services to government are likely to be out of pocket
The disruption to economic activity for the first quarter of 2019 has been lowered by an estimated US$8 billion, a figure which reflects both the five-week shutdown and an expected spike in activity once federal funding resumed.
The publication notes that the impact of the shutdown will not necessarily be uniform. “Underlying those effects on the overall economy are much more significant effects on individual businesses and workers,” it says.
“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.”
Around 800,000 federal employees had been either furloughed or forced to work without pay, though they are guaranteed back pay. The situation is worse for an estimated 4 million contractors, many of whom have no guarantee of receiving pay for their work during the shutdown.
The shutdown ended on Friday 25 January when President Donald Trump announced he had backed away from his hardline stance on the shutdown and had agreed to sign a short-term spending bill. The surprise announcement ensured the government will remain open until at least 15 February.
The CBO sees the partial government shutdown as an economic blip totaling $3 billion.
— Bloomberg QuickTake (@QuickTake) January 28, 2019
Trump agreed to a short-term funding bill last week
The bill did not provide for any funding for a border wall with Mexico, which had previously been the main source of division between the two parties. Trump had been demanding some US$5.7 billion to construct a wall stretching more than 200 miles.
“This was in no way a concession,” Trump wrote on Twitter after signing the bill. “It was taking care of millions of people who were getting badly hurt by the Shutdown with the understanding that in 21 days, if no deal is done, it’s off to the races!”
He had previously given short shrift to attempts to end the shutdown, and was accused of throwing a “temper tantrum” when Democrat House Speaker Nancy Pelosi and colleagues refused to give in on the wall funding.
Trump will now work with Democrat lawmakers to try to find a compromise on border security which is palatable to both sides. If there is no progress, he has threatened to shut down the government again, or possibly declare a national emergency to get his wall built.
The first meeting between representatives of the two parties is scheduled to take place on 30 January. The meeting will be open to the public.
Header image credit: The White House