President Trump wants to build a wall at the southern border — but so far the high-stakes political fight has been more of a wall around the mall.
Consultancy Challenger, Gray & Christmas Inc. estimated on Wednesday that the economy would lose $3.38 billion in consumer spending a month as 800,000 federal workers tighten their belts amid a partial government shutdown.
The workers, who process paperwork for IPOs, tabulate the overall retail sales figures, prepare for the upcoming Census and thousands of other official tasks, missed their first paychecks last week.
“This estimate does not include contract workers who are going without pay, or the restaurants, transportation agencies — cabs and trains — that are losing money as these workers go unpaid and not at work. The number could easily balloon to over $5 billion monthly,” said Andrew Challenger, vice president of the consultancy.
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The political standoff is now in its fourth week, making it the longest government shutdown in history as Trump squares off with Congress and tries to secure $5.7 billion to build a long-promised wall to keep out illegal immigrants — a barrier that Trump repeatedly promised would be paid for by Mexico.
Economists have been warning for weeks that the shutdown could impact the economy with furloughed workers left with little choice but to curb spending, and now the White House’s top economist is seeing the impact, too.
Kevin Hassett, chairman of the Council of Economic Advisers, reported the economy was shrinking by a tenth of a percentage point each week that the partial shutdown drags on. He also confirmed live on Fox Business that first-quarter GDP growth would likely come in below 1.7 percent. The U.S. economy expanded by 2.2 percent during the same period last year.
“So what happens is that when the Bureau of Economic Analysis, when they calculate GDP, what they do is they basically have to estimate how much the government produces, and their estimate of how much the government produces is based on just government workers going to work and getting paid,” Hassett said.
“And so if government workers don’t go to work, then they reduce their output calculations accordingly. We made an early estimate right at the beginning of the crisis…and have been studying hard as this has gone on and have found that actually the damage is a little bit worse because of government contractors, something that was excluded from our first analysis.”
Hassett added that it should be made up once the furloughed workers receive back pay and the economy should go back to a 3 percent growth rate: “What will happen is it’ll be lower this quarter and higher next quarter, assuming that this thing gets worked out by the end of the quarter.”
His comments marked an about turn from just last week when he told PBS’ “NewsHour” that furloughed workers were essentially getting a free vacation and that in some sense “they’re better off.”