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31Jan2019

Government Shutdown Estimated to Cost $3 Billion

By Selina Stoller, Summit Consumer Receivables Acquisitions, LLC ***

The longest U.S. government shutdown in history is expected to cost America $3 billion.

Monday’s Congressional Budget Office (CBO) report is projecting an overall $11 billion shutdown price-tag with $8 billion being made up in economic activity as back pay goes out to federal workers.

The CBO furthered explained the shutdown’s economic effect as lowering America’s gross domestic product by $3 billion for the fourth quarter of 2018 and by $8 billion for the first quarter of 2019. However, the report also predicts the economy will grow about $8 billion faster in the next two quarters that it would have without the shutdown – squelching possible long-term shutdown consequences.

As a percentage of the overall economy, the impact of the shutdown is a small 0.2 percent of GDP for the first quarter of 2019.

But beneath this brief agreement and another impending budget are the effects a shutdown could have on individual businesses and workers. A slowdown in economic activity from a government shutdown would occur due to less government spending and reduced spending by hundreds of thousands of government workers. While recovery would be quick, there would be still government output loss.

The CBO also projected Monday that the American economy would grow by 2.3 percent in 2019. The U.S. economy grew at an annualized rate of 4.1 percent from April to June in 2018 with an average 3.1 percent annual growth possibly due to tax cut legislation.

The estimated cost of the shutdown does not include all factors due to a lack federal economic data. Regardless, the U.S. economy is expected to bounce back from its longest ever government shutdown quickly despite fears of global economic slowdown and ongoing trade tensions with China.

New trade barriers between the U.S. and its trading partners could have a slight downward impact on the overall economy. Trade tariffs will reduce the GDP by 0.1 percent by 2022 and the CBO projects the economy to continue to grow by 1.7 percent in 2020, the year of the next presidential election.

  • 31 Jan, 2019
  • Summit Consumer Receivables Acquisitions, LLC

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