After Congress was unable to reach an agreement and pass a bill to continue funding the government last night, it shut down. That will cost at least $300 million each day in lost economic output at the beginning, according to IHS Inc. The costs per day will accelerate the longer a shutdown lasts as consumers and businesses cut back on spending.
If the shutdown lasts somewhere between three and four weeks, it could cost the economy about $55 billion, according to Moody’s economist Brian Kessler. Federal spending will be reduced by about $8 billion, which could shave 0.8 percent off of GDP output, and the furlough of 800,000 government workers will suck about $1 billion a week from the economy in their lost pay. These impacts and others could mean a loss of 1.4 percent in economic output, according to Moody’s Mark Zandi. The government also stands to lose out on billions in lost tax revenue.
But even these estimates may not take the full impact into account. It’s hard to calculate because, as ThinkProgress’s Alan Pyke has written, it involves calculating “damage to consumer, investor, and business confidence coming out of a shutdown, and lost time spent preparing for the worst in the weeks before a shutdown.” And they don’t take into account other serious impacts such as contracts that have to be put on hold, loans that won’t go out from the Small Business Association, and permits that won’t be granted by the Environmental Protection Agency. Tourism dollars will be lost in the areas around shuttered national parks and low-income mothers and their infants could lose much needed support, to name a few others.
Republicans may have felt that taking the government hostage to attempt to defund or delay Obamacare was a winning strategy, but even its usual allies in the business world warned against the tactic, worrying about these economic costs of a shutdown long before it happened.