Federal Closure May Cost US Economy Billions Each Week, Experts Caution
Senior officials have acknowledged that the ongoing federal government shutdown could significantly harm the American economic system. Based on financial experts, the economic impact may amount to billions of dollars each week.
Economic Impact Analysis
"This approach of shutting down the government and reducing GDP is counterproductive for meaningful discussion," commented the US treasury secretary. "We expect adverse impacts on economic expansion, economic development, and working Americans."
Extended failure to reach agreement would be costly.
"Our evaluation indicates that each week of government shutdown would reduce US GDP growth by 0.1 ppt during Q4, translating to an about $7 billion economic hit to the country's economy," noted a detailed study.
Potential Consequences of Extended Shutdown
Further assessment indicates the financial impact could be larger, with forecasts indicating potential losses of approximately $15 billion in gross domestic product each week. A monthlong shutdown could cause additional unemployment affecting thousands of workers.
Retail expenditure in the United States could drop by about $30 billion during a 30-day closure.
Broader Economic Effects
"Financial assessment reveals that the government shutdown may have extensive economic effects that reduce US potential through reduced expansion, increased unemployment, and disruptions to essential services including retirement benefits, aviation services, and food support programs," described the economic assessment.
"These impacts will worsen as the situation extends."
Historical Context
Financial assessment observed that certain impacts would be somewhat mitigated by backpay for workers and economic recovery following government reopening, but advised about possible long-term consequences.
"In addition to short-term economic impacts, a government shutdown would also impact financial markets and business confidence," continued the report. "Most critically, it would postpone the release of crucial economic data during a critical period for the US economy – complicating the decision-making process for central bank officials, investors, and corporate executives who are navigating a very unpredictable, data-dependent financial landscape."
The last federal closure, which continued for over a month between late 2018 and early 2019, was estimated to cost approximately $11 billion to the American economy, including irrecoverable costs of about $3 billion, according to government assessment. The government document did not account for certain indirect impacts such as suspended federal permits and reduced loan availability.