government shutdown

Government Shutdown Will Cost the U.S. $3 Billion, CBO Projects

Government workers in line at a food bank. Photo: Andrew Harnik/AP/REX/Shutterstock

Donald Trump’s government shutdown did not win him $5.7 billion in “wall” funding — but it did cost the American economy $3 billion in GDP that it won’t be getting back, according to a new report from the Congressional Budget Office (CBO).

The longest shutdown in American history slowed economic activity in two ways: by preventing federal outlays from circulating through the economy, and reducing the consumer spending of government workers. The CBO believes that these two developments shaved $11 billion off U.S. growth in the immediate term. But it expects that $8 billion of this loss will be recouped, as federal workers start collecting — and spending — their back pay. Five weeks of lost government outlays, however, will leave the U.S. $3 billion poorer than it otherwise would have been.

For Trump, though, the worst news in the CBO report has nothing to do with the shutdown. The president is already facing an uphill battle for reelection, thanks to his historic unpopularity, the strength of the Democratic field, and secular demographic trends that give Team Blue the upper hand in national elections. Now, government experts are saying that the economy will also be working against Trump in 2020.

The relationship between macroeconomic conditions and election outcomes is a loose one. But, generally speaking, when the economy is trending downward in an election year, the incumbent party tends to do worse, all else being equal. And by passing a large fiscal stimulus during his first year in office, Trump appears to have set himself up to preside over slowing economic growth in 2020. After expanding at 3.1 percent clip in 2018, the CBO expects growth to fizzle over the next two years — falling to 2.3 percent in 2019, and 1.7 percent in 2020 — as our economy burns through the sugar high that Trump’s tax cuts and spending increases previously provided.

To be sure, the CBO is not an oracle. In fact, it doesn’t even have all that great a record at economic prognostication. It’s possible that its forecast for 2020 is way off base. But, if it is, that won’t necessarily be good news for the president.

Government Shutdown Will Cost U.S. $3 Billion, CBO Projects