Government Shutdown Financial Effects to Be Felt for Long Time

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Although the government shutdown is officially over for now, the financial effects will be felt long after workers return to their places of employment.

The five-week shutdown is expected to have caused a loss of $11 billion to the overall economy. A report released on Monday by the Congressional Budget Office cited this figure as the expected loss. The loss is attributed to reduced working hours, paychecks that have been delayed, and lost contract work.

Of that figure, $3 billion will never be recovered. This equates to approximately 0.02 percent of the expected gross domestic product in the year 2019. The report additionally notes that some of that $11 billion figure will be recovered as workers return to their jobs and work resumes.

Also affecting the economy is the loss in consumer spending blamed on government workers not having the extra dollars to pour back into the economy as a result of the lost paychecks. Although official federal employees will receive back pay eventually, contract work that was lost will not be repaid.

As the week continues, all eyes will be on the impending release dates of a variety of reports that were delayed as a result of the government shutdown. Without so much of this vital economic data to observe, markets have been in flux and investors have been uncertain how to proceed.

The Bureau of Economic Analysis was forced to delay its fourth-quarter GDP estimate that was scheduled for this week because of the long pause in data collection that was a result of the shutdown. Reports are now indefinitely delayed through at least next week.

The CBO report also estimates that tax revenues will be decreased by approximately $2 billion. This reduction is being attributed to the lowered enforcement capability by the Internal Revenue Service as a result of the shutdown affecting so much of the IRS staffing capacity.

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