As Washington got fully back to work on Monday after a 35-day shutdown, the official tally of the economic costs showed an $11 billion drag on the economy — $3 billion of which will simply be gone forever.
That’s just a fraction of the roughly $18.7 trillion U.S. economy, but the economic activity lost forever was more than halfway to the $5.7 billion in funding President Donald Trump was looking for when he shut down a quarter of the federal bureaucracy just before Christmas.
The political power play ended up being disastrous for Trump, who saw his approval ratings plummet and who ultimately acceded to the demands of Democrats by agreeing to reopen the government for three weeks to negotiate a border security package. It also turned out badly for the 500,000 federal workers working without pay and another 300,000 furloughed workers, who had their lives disturbed and are now due back pay.
The nonpartisan Congressional Budget Office said in a report that the shutdown cost $3 billion in GDP in the fourth quarter and $8 billion in the first quarter.
“Although most of the real GDP lost during the fourth quarter of 2018 and the first quarter of 2019 will eventually be recovered, CBO estimates that about $3 billion will not be,” the report said. “That amount equals 0.02 percent of projected annual GDP in 2019.
“Underlying those effects on the overall economy are much more significant effects on individual businesses and workers,” the report said. “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…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.”
The shutdown also put a damper on the initial public offering market as the Securities and Exchange Commission worked with a bare-bones staff and delayed official reports, such as the monthly update on retail sales.
Federal employees come back to work, though, with the threat of another shutdown already in place. The deal Trump struck with Congress only reopened the government through Feb. 15.