CBO Says Government Shutdown Has Reduced Real GDP by $7 Billion

The Congressional Budget Office said Wednesday (Oct. 29) that the government shutdown could reduce real gross domestic product by between $7 billion and $14 billion, depending on how long the shutdown lasts.

A four-week shutdown would cost $7 billion, a six-week shutdown would cost $11 billion and an eight-week shutdown would cost $14 billion, the CBO said in a report released Wednesday.

The government shutdown began on Oct. 1, making Wednesday the end of the fourth week.

The CBO performs nonpartisan analysis for the U.S. Congress, according to its website.

“In CBO’s assessment, the shutdown will delay federal spending and have a negative effect on the economy that will mostly, but not entirely, reverse once the shutdown ends,” the CBO said in a summary of its findings.

The CBO added that real GDP will be lower in the fourth quarter than it would have been without a shutdown but will be temporarily higher after the shutdown than it would have been otherwise.

“Although most of the decline in real GDP will be recovered eventually, CBO estimates that between $7 billion and $14 billion (in 2025 dollars) will not be,” CBO said in its summary.

“The effects of the shutdown on the economy are uncertain,” CBO said in the summary. “Those effects depend on decisions made by the administration throughout the shutdown. In addition, how federal employees and contractors respond to the delay in compensation is uncertain.”

One effect of the government shutdown is a pending halt to Supplemental Nutrition Assistance Program (SNAP) benefits. A banner on the home page of the U.S. Department of Agriculture ’s Food and Nutrition Service said Wednesday that SNAP benefits are set to stop Saturday (Nov. 1) because the budget impasse has stopped funding for the program.

It was reported Oct. 8 that the government shutdown is the latest headache facing small businesses. For example, the shutdown has led to stop-work orders on some government projects and has stopped government-backed small business lending.

The U.S. Travel Association said Oct. 8 that during the first week of the government shutdown alone, America’s travel economy suffered $1 billion in lost spending.