The ongoing federal government shutdown, now extending beyond four weeks, is having measurable consequences on both individuals and the broader economy. Workers without pay and disruptions to food assistance programs like SNAP have created immediate hardship for many Americans. Beyond these direct effects, economists are assessing the wider economic fallout from the prolonged lapse in federal operations.
Historical data suggests that previous shutdowns have led to economic losses in the billions. While this may seem small relative to the size of the $30 trillion U.S. economy, even marginal setbacks can influence growth trajectories. The Congressional Budget Office (CBO) released projections on October 29 estimating the impact of a shutdown lasting four, six, or eight weeks. As of November 12, the closure would reach the six-week mark if unresolved.
According to CBO’s analysis, a four-week halt in federal spending would reduce real economic growth in the fourth quarter of 2025 by 1%, with an eight-week disruption cutting growth by 2%. These figures are annualized, meaning they reflect what the quarterly slowdown would equate to over a full year. Much of the lost output is expected to be recovered in early 2026—assuming the shutdown ends soon. However, the agency warns that between $7 billion and $14 billion in economic activity could be permanently lost, depending on duration. A significant portion of this irreversible loss stems from reduced productivity due to employee furloughs.
The CBO’s estimates rely on several key assumptions: that furloughed workers will eventually receive back pay, that delayed government spending on goods and services will resume fully, that active-duty military personnel remain paid, and that missed SNAP benefits will be reimbursed retroactively. Yet recent developments cast doubt on these assumptions.
On October 7, President Donald Trump stated that not all federal employees should automatically receive retroactive wages, suggesting some “don’t deserve” it. The White House has also issued a legal interpretation challenging the certainty of a 2019 law that previously guaranteed such payments. Additionally, the administration has taken unilateral steps to cancel congressionally approved expenditures, including attempts to defund the Gateway Tunnel project, emboldened by the current political climate.
While military personnel have continued receiving pay, this has only been possible by reallocating $5.3 billion from Pentagon research, procurement accounts, and funds established under the One Big Beautiful Bill Act. Meanwhile, the administration is contesting court efforts to release emergency funding for SNAP, leaving uncertain whether beneficiaries will be compensated for missed aid.
Douglas Holtz-Eakin of the American Action Forum noted that if any of the CBO’s foundational assumptions fail to hold, the actual economic damage could far exceed current forecasts. The CBO itself acknowledged uncertainty, stating that the ultimate impact depends heavily on administrative decisions made during the crisis.
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Analysis: How much could the federal government shutdown cost the economy?
This article originally appeared on PolitiFact. n nThe federal shutdown — one month long and counting — has an obvious economic impact for government workers who aren’t receiving paychecks and food aid recipients who didn’t get their benefits Nov. 1. n nWATCH: Federal workers struggle without pay as long shutdown begins to affect more Americans n nBut what about the broader economy? History points to some effect there, too. n nIn past shutdowns, estimates of lost economic activity have reached into the billions of dollars. In the context of a $30 trillion economy, that’s not a lot. But on the margins, economists say it can have an effect. n nThe Congressional Budget Office, Congress’ nonpartisan number cruncher, released an Oct. 29 estimate of how much the economy could lose from a four-week, six-week and eight-week shutdown. The shutdown has already exceeded four weeks; if it continues, Nov. 12 would mark six weeks. n nHere’s a look at the agency’s calculations — and some of the count’s possible shortcomings. n nWhat is the current shutdown’s expected economic impact? n nThe CBO estimate says the federal spending delay will produce short-term economic losses — largely in the fourth quarter of 2025 — that will mostly be recouped during the first quarter of 2026, assuming the shutdown ends by then. n nREAD MORE: ‘You cannot crowdsource $8 billion.’ Here’s what to know about the lapse in SNAP benefits n nCBO projected how much the shutdown would hamper U.S. economic growth per quarter, adjusted for inflation and multiplied by four, to convert a quarterly figure into an annual one. It estimated that a four-week shutdown would reduce fourth-quarter 2025 growth by 1% and an eight-week shutdown would reduce fourth-quarter growth by 2%. n nMost of this lost growth, CBO said, would be made up in the first quarter of 2026 — but not all of it. Between $7 billion and $14 billion would be permanently lost, depending on how long the shutdown lasts. n nMuch of the permanently lost economic output would stem from furloughed employees’ reduced output, CBO said. n nWhy might this figure be low? n nThis estimate could be low because of what CBO assumes when making its calculations. n nThe agency listed four assumptions in its estimate: n nWhen the shutdown ends, furloughed employees will be paid retroactively. n nWhen funding resumes, “all the spending on goods and services that did not occur during the shutdown will be made up.” n nActive-duty military and certain law enforcement will continue to be paid during the shutdown. n nWhen the shutdown ends, missed Supplemental Nutrition Assistance Program benefits will be paid retroactively. n nIn each of these cases, however, the administration has either proposed doing the opposite or has struggled to accomplish the objective. n nOn Oct. 7, a week after the shutdown began, President Donald Trump said furloughed federal workers should not necessarily receive back pay once the shutdown is over and that some workers “don’t deserve” it. The White House wrote a legal opinion claiming a 2019 law guaranteeing eventual payment for furloughed workers is not ironclad. n nDuring Trump’s second term, his administration has regularly moved unilaterally to cancel spending approved by Congress. Some of those efforts have been blocked in the courts, but the shutdown has emboldened the administration. One example is its effort to defund the Gateway Tunnel project between New York and New Jersey. n nSo far, active-duty military personnel have been paid, and they are scheduled to receive their next paychecks Oct. 31. But the administration was able to do this only by shifting $5.3 billion from research and development funding, from a Pentagon procurement account and from an account created under Trump’s One Big Beautiful Bill Act. n nThe administration is fighting in court efforts to require the use of emergency funding to pay for SNAP benefits, which are otherwise set to expire Nov. 1. It’s unclear whether the administration would reimburse recipients retroactively once the shutdown ends. n nDouglas Holtz-Eakin, president of the center-right American Action Forum, said it’s fair to assume that if any or all of CBO’s assumptions ultimately prove incorrect, there could be a substantially bigger hit to the economy than what the agency now projects. n nCBO acknowledged in its analysis that “the effects of the shutdown on the economy are uncertain” and depend on “decisions made by the administration throughout the shutdown.” n nA free press is a cornerstone of a healthy democracy. n nSupport trusted journalism and civil dialogue.