Senior officials in Donald Trump’s administration have admitted that the ongoing federal government shutdown could inflict billions of dollars of damage on the US economy each week, with analysts warning of a significant hit to growth.
Scott Bessent, the US treasury secretary, told CNBC: “This isn’t the way to have a discussion, shutting down the government and lowering the GDP. We could see a hit to the GDP, a hit to growth and a hit to working America.”
A report by EY Parthenon estimated that each week of shutdown would reduce US GDP growth by 0.1 percentage points in the fourth quarter, translating into a $7bn weekly hit. The figure accounts for the effect of unpaid furloughed federal workers, delayed government procurement and a decline in demand.
However, a White House memo from the Council of Economic Advisers suggested the economic impact could be even larger, estimating a $15bn loss in gross domestic product each week the shutdown extends. The memo also forecast that a monthlong shutdown would result in an additional 43,000 unemployed workers and reduce consumer spending by $30bn.
The EY Parthenon analysis cautioned that while backpay and a rebound after reopening would offset some damage, lasting effects could include disruptions to financial markets and private sector confidence. It also noted that delayed release of key economic data would complicate decision-making for the Federal Reserve and business leaders.
The last government shutdown, a 35-day partial closure from December 2018 to January 2019, cost at least $11bn to the US economy, including a permanent $3bn loss, according to the Congressional Budget Office.
