government shutdown

The Longer the Shutdown Lasts, the More It Hurts the Economy

The Orlando airport is collecting food donations for unpaid federal workers. Photo: John Raoux/AP/REX/Shutterstock

It’s been clear for weeks that the partial government shutdown is hurting Americans. No group has been harmed more than the 800,000 furloughed workers, who’ve taken to using food banks as they go without pay. But the ripple effects have also made life harder on those trying to catch a flight or visit a national park. And now, as the shutdown approaches the end of its fourth week, it’s becoming clear that it’s hurting the economy too.

On Tuesday, White House economic adviser Kevin Hassett said the shutdown, which has cost the economy close to $4 billion, causes a 0.13 percent dip in quarterly economic growth for each week it goes on. “That means that the economy has already lost nearly half a percentage point of growth from the four-week shutdown,” the New York Times reports.

This is the effect of 800,000 federal workers and another 4 million government contractors going without pay. Those furloughed workers will receive back pay once the government reopens, but the contractors, who are coping with the shutdown by filing for unemployment and tapping their savings, will not.

Hassett said some of the growth problems will correct themselves once federal employees return to work. But even when this shutdown is over, the willingness of Congress and the president to use shuttering the government as a negotiating tactic could hurt the economy down the line.

Some economists have begun to warn … that economic confidence could be undermined as businesses, consumers and investors lose faith in the ability of political leaders to find agreement on issues like raising the federal debt limit and approving trade deals.

That lack of confidence could snowball into a self-inflicted economic contraction on the heels of what appears to have been the nation’s strongest year of growth since the 2008 financial crisis.

The warnings about the shutdown’s economic impact are coming from outside the White House too. Economist Ian Shepherdson has said that if the shutdown drags on through the end of March, “we would look for an outright decline in first quarter GDP.”

That assessment got the attention of JPMorgan CEO Jamie Dimon, who called for “our country’s leaders to strike a collaborative, constructive tone, which would reinforce already-strong consumer and business sentiment,” in an earning’s release this week.

For weeks, stories have been told of the real suffering caused by the shutdown — in the lives of federal workers and contractors, SNAP recipients and those who depend on federal housing assistance. None of this has caused the Trump administration to move with any urgency toward ending the shutdown. Maybe the potential of cratering the economy will.

The Longer the Shutdown Lasts, the More It Hurts the Economy