Report: Government Shutdown Cost US Economy $3 Billion

The longest-ever partial U.S. government shutdown cost the country’s economy $3 billion in lost economic activity that won’t be recovered, the Congressional Budget Office concluded Monday.

The CBO said its assessment of the effects of the 35-day shutdown on the U.S. economy, the world’s largest, showed that $3 billion in economic activity was lost in the waning days of 2018 after the government closures took effect December 22, and another $8 billion in January, extending to last Friday when the shutdown was ended.

However, the CBO said with 800,000 federal workers who were furloughed or forced to work without pay being paid back wages in the coming days and government operations resuming, all but $3 billion in economic activity “will eventually be recovered” in the coming weeks.

CBO estimated that about $18 billion in federal discretionary spending was delayed during the shutdown, although most of that is likely to resume again — unless there is another shutdown in less than three weeks.

President Donald Trump and Democratic and Republican congressional leaders agreed to end the shutdown and created a bipartisan panel to negotiate security provisions along the U.S.-Mexico border.

The shutdown was spawned over Trump’s demand for $5.7 billion for a border wall to thwart illegal immigration, perhaps his most prominent 2016 campaign pledge during his successful run for the presidency. Opposition Democrats, however,have refused his demand for border wall money while saying they are willing to offer more funding for other security measures, including tightened controls at ports of entry, more border agents and increased use of technology to monitor illegal border crossings.

Trump said Sunday he thinks there is less than a 50 percent chance the congressional border security negotiators will be able to reach an agreement he would accept by their self-imposed Februay 15 deadline.

He said another government shutdown is “certainly an option” if there is no agreement or he could declare a national emergency and attempt to build the wall without congressional approval by tapping unspent government funds.

However, several prominent Republican lawmakers have urged Trump to not declare a national emergency, an action that would draw quick Democratic lawsuits in opposition.

Smaller GDP

The CBO said the $3 billion permanently lost to the U.S. economy means the projected 2019 gross domestic product of more than $19 trillion will be .02 percent smaller than it otherwise would have been.

But its report said “underlying those effects on the overall economy are much more significant effects on individual businesses and workers.

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.”

Still, the CBO said that “all of the estimated effects and their timing are subject to considerable uncertainty. In particular, CBO is uncertain about how much discretionary spending was affected by the partial shutdown, how affected federal employees and contractors adjusted their spending in response to delayed compensation, and how agencies will adjust their spending on goods and services now that funding has resumed.”

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