Economy & Trade

The shutdown cost the US economy $3 billion that isn’t coming back

That’s according to the Congressional Budget Office.

The partial government shutdown may be over, but its economic ramifications are not — in fact, some of the costs of the five-week shutdown will never be recovered.

The nonpartisan Congressional Budget Office on Monday estimated that the shutdown cost the economy $11 billion. Most of that will be recovered, but not all of it: The CBO said that some $3 billion in economic activity has been permanently lost.

And not everyone felt the effects equally. The report said that the shutdown had “much more significant effects on individual businesses and workers” than the overall economy.

“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,” the report reads. “Some of those private-sector entities will never recoup that lost income.”

The office also warned that the effects of the shutdown aren’t entirely known yet. The impact could be less than it believes now — or much greater.

President Donald Trump on Friday announced that he had agreed to sign a short-term spending bill to reopen the government that would last through February 15. The bill contains no funding for a border wall, which was at the root of the shutdown in the first place. Trump demanded that Congress agree to allocate $5.7 billion for some 200 miles of a wall at the US-Mexico border and for weeks refused to sign any legislation without it, resulting in the longest government shutdown in US history.

Over the next three weeks, Trump and lawmakers are supposed to work out a solution on border security. Otherwise, Trump has threatened to shut down the government again, or declare a national emergency to get his border wall.

The government shutdown affected the US economy in a number of ways, and the longer it went on, the worse it got.

As a result of the shutdown, some 800,000 federal government workers were furloughed or forced to work without pay and missed their second paycheck on Friday. (They’re guaranteed back pay.) An estimated 4 million contractors were also affected, and unlike federal workers, many of those individuals don’t get back pay.

Beyond individual workers, businesses were harmed, too: Small businesses were unable to get loans, private companies couldn’t go public, and federal courts warned they might run out of money.

A lot of the economic activity that was lost will bounce back: In the next couple of quarters, GDP will be temporarily higher than it would have been without the shutdown because of the rebound. But the shutdown will still be a net economic negative overall, and, of course, it will be much more detrimental to those directly affected by it.

Moreover, recovering from the shutdown is going to take time. Amanda Sakuma explained the situation for Vox over the weekend — while federal workers will get paid, a lot of contractors won’t, and there’s no guarantee the government won’t be shut down again in three weeks. IRS backlogs may mean tax refunds are delayed, and museums aren’t able to reopen overnight.

Before the shutdown began, Trump said he was happy to take the “mantle” of the situation. But as time — and the shutdown — went on, the landscape became increasingly worse for the country and for the president.

Polls showed that Americans were blaming Trump for the shutdown, and his approval ratings took a hit. And the effects of the ordeal were increasingly detrimental to the lives of government workers and everyday Americans. Vox’s Li Zhou recently delved into what happened:

While the Trump administration has done its best to try to curb the painful effects of the shutdown, doing everything from recalling furloughed IRS workers for tax season to identifying extra funding for food stamps, there was only so much it could do to keep vital services afloat while the government was closed.

This Friday, a snafu with air traffic control attracted widespread coverage and even safety concerns. As Vox’s Dara Lind reports, because there were so many air traffic controllers calling in sick at key airports along the Eastern seaboard, many planes weren’t able to land safely at places like New York’s LaGuardia Airport.

Countless other government services have also been stalled including IPO reviews, immigration cases, and low-risk food inspections. The pile-up of problems caused by the shutdown has been growing with each passing day, so much so that it’s quickly become completely unmanageable.

A lot of that will be turned around, but not all. Including the harm done to the economy.


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