The dispute over U.S. government funding has already begun to have substantial economic consequences. Each week of a government shutdown costs the U.S. economy up to $7 billion and reduces Gross Domestic Product (GDP) growth by 0.1 percentage points, according to estimates by EY-Parthenon chief economist Gregory Daco.
- According to the most recent recorded shutdown—the longest in U.S. history, which occurred during Donald Trump’s first presidency—the cost reached $11 billion, according to the Congressional Budget Office (CBO).
- The financial consequences of a shutdown are not limited to salaries. Federal agencies must design and implement contingency plans, which involve additional administrative expenses.
- A September 2019 Senate report detailed that the three most recent shutdowns—2013, 2018, and 2019—cost U.S. taxpayers nearly $4 billion: “at least $3.7 billion in back pay for furloughed federal employees and no less than $338 million in other expenses such as administrative costs, lost revenue, and interest penalties,” the committee that prepared the report stated.
This impact stems from unpaid federal employees, delays in government purchases, and reduced demand in the economy. While some economic damage is recovered once the government reopens, not all losses are reversed, the consulting firm explains.
According to the most recent recorded shutdown—the longest in U.S. history, which occurred during Donald Trump’s first presidency—the cost reached $11 billion, according to the Congressional Budget Office (CBO).
During that period, which lasted 34 days between late 2018 and early 2019, the CBO calculated that real GDP for the fourth quarter of 2018 decreased by $3 billion (in 2019 constant dollars). For the first quarter of the following year, the damage was estimated at $8 billion compared to expectations, accounting for the five weeks of partial shutdown and the effect of returning to normal operations.
The psychological effect is also significant. Data from the University of Michigan, cited by EY-Parthenon, showed that the 2019 shutdown caused “the largest monthly drop in the Consumer Sentiment Index” since 2012. The atmosphere of uncertainty adds to the direct economic harm.
The financial consequences of a shutdown are not limited to salaries. Federal agencies must design and implement contingency plans, which involve additional administrative expenses.
Other revenues are also compromised: “agencies lose the fees they normally collect from visitors to national parks or those processing certain permits and visas,” the network notes. Additionally, extra costs arise from federal contracting and salary compensations for government employees once the shutdown ends.
Under current federal laws, federal workers receive full back pay when normal operations resume, whether or not they were actively working during the shutdown.
During the shutdown days alone, the CBO estimates the government must cover $400 million daily in furloughed employees’ salaries, according to a projection cited by the White House.
A September 2019 Senate report detailed that the three most recent shutdowns—2013, 2018, and 2019—cost U.S. taxpayers nearly $4 billion: “at least $3.7 billion in back pay for furloughed federal employees and no less than $338 million in other expenses such as administrative costs, lost revenue, and interest penalties,” the committee that prepared the report stated.
Data from the Office of Management and Budget (OMB) showed that during the 16-day 2013 shutdown, government workers received $2.5 billion in wages and benefits for days not worked, in addition to $10 million in interest delays and lost government fees.
For the 2025 crisis, the Donald Trump administration has taken a different approach. The president and Vice President JD Vance, backed by OMB Director Russell Vought, warned that if the shutdown drags on, federal job cuts (“Reduction in Force” or RIF) would begin. “We will start staff reductions in two days if the situation does not improve,” Vought confirmed to Republican lawmakers.
In President Trump’s words, “a lot of good can come from shutdowns. We can make adjustments during the shutdown that they can’t reverse, things like eliminating large numbers of employees and programs they prefer.”
Image: Infobae
