The Congressional Budget Office (CBO) warned on Wednesday that the federal government shutdown this year has already cost the U.S. economy at least $18 billion, and that figure will “grow further” in the coming weeks.
The nonpartisan organization emphasized that most of the impact will be temporary, with economic growth expected to receive a short-term boost in the first quarter of next year. However, they estimate that between $7 billion and $14 billion of the GDP impact will be unrecoverable, depending on the ultimate duration of the government shutdown.
As of Wednesday, the partial government shutdown had entered its 29th day with no end in sight. Senate Republicans called on Democrats to support a temporary funding bill to fund federal agencies until November 21; while Democrats demanded negotiations to extend the expiring federal tax credit to help Americans purchase private health insurance through the Affordable Care Act. .
According to CCTV News, Senate Minority Leader Chuck Schumer stated on the 28th that the US federal government shutdown could continue until November, at which point millions will face high healthcare costs due to the expiration of the Affordable Care Act tax credit. Hundreds of thousands of federal workers have been furloughed, others are working without pay, and federal food assistance is also nearing its end.
A report released by the CBO on Wednesday showed that U.S. GDP has already fallen by at least one percentage point in the fourth quarter due to the government shutdown. Once the shutdown enters its sixth week (around mid-November), real GDP growth in the fourth quarter will be 1.5 percentage points lower than normal, equivalent to a $28 billion loss in economic output.
Furthermore, if the shutdown lasts for eight weeks, around the Thanksgiving holiday, the impact on real GDP would increase to two percentage points, or $39 billion.
“While most of the decline in real GDP will eventually be recovered, the Congressional Budget Office estimates that between $7 billion and $14 billion of that will not be recovered,” CBO Director Phillip Swagel wrote in a letter to House Budget Committee Chairman Jodey Arrington, a Texas Republican, on October 29, at the latter’s request for the analysis.
Specifically, the CBO warned that if the government shutdown ends this week, the economy will suffer a permanent loss of $7 billion. If the shutdown lasts for six weeks until November 12, the permanent loss will reach $11 billion; if the shutdown lasts for eight weeks until November 26, the permanent loss will reach $14 billion.
“The economic impact of the shutdown is still uncertain. These impacts depend on the decisions the government makes during the shutdown,” Swagel added.
The CBO also reported that a number of factors contributed to the contraction in economic activity, including reduced services provided by federal employees, a decline in private sector output, and reduced federal government spending on goods, services, and food assistance.
Finally, the agency warned that 650,000 federal employees have been furloughed due to the government shutdown. If all of these employees are considered temporarily unemployed, it could push the unemployment rate up by 0.4 percentage points in October, which would be the largest monthly increase in the unemployment rate since the outbreak of the pandemic.
(Article source: CLS)
