Washington — The ongoing federal shutdown is expected to impose significant financial burdens on both the economy and taxpayers. n nAccording to Gregory Daco, chief economist at EY-Parthenon, each week of the shutdown could trim $7 billion from economic output and reduce GDP growth by 0.1 percentage points. This estimate reflects lost wages for federal workers, delayed government purchases, and weakened consumer demand. n nSome of these losses may be offset once operations resume, as furloughed employees typically receive retroactive pay and economic activity rebounds. However, not all impacts are reversible. The previous shutdown under President Trump, lasting 34 days from December 2018 to January 2019, cost the U.S. economy approximately $11 billion, according to the Congressional Budget Office (CBO). n nDuring that episode, the longest in history, the CBO estimated a $3 billion reduction in real GDP during the final quarter of 2018. In the first quarter of 2019, real GDP was $8 billion lower than it would have been without the disruption, reflecting both the five-week partial closure and the lag in recovery. n nConsumer confidence may also suffer. The 2019 shutdown triggered the steepest monthly decline in the University of Michigan’s Consumer Sentiment Index since 2012, according to EY-Parthenon. n nAdditional costs arise from administrative overhead, including the preparation of contingency plans and the restart process. Federal agencies lose revenue from park entrance fees, permit applications, and visa processing. Contracting premiums rise during shutdowns, and the government incurs expenses for back pay. n nUnder current law, furloughed federal employees must be paid their regular wages once operations resume. The CBO estimates the federal government will spend $400 million per day on compensation for non-working employees. n nA September 2019 report by a Senate subcommittee found that the shutdowns in 2013, 2018, and 2019 collectively cost taxpayers nearly $4 billion—$3.7 billion in back pay and at least $338 million in administrative costs, lost revenue, and interest penalties. n nThe 2013 shutdown, lasting 16 days, resulted in $2.5 billion in wages and benefits paid for unworked hours, along with $10 million in interest and lost fees, according to the White House Office of Management and Budget. n nHowever, the current situation may diverge from past patterns. President Trump, Vice President JD Vance, and OMB Director Russell Vought have indicated that permanent layoffs could occur if the shutdown persists. Vought has already begun halting or redirecting federal funding, particularly in states that supported Kamala Harris, including withholding $18 billion in infrastructure projects in New York City and cutting climate-related grants. n nVought informed Republican lawmakers that Reduction in Force (RIF) measures could begin within days. n nPresident Trump suggested the shutdown could be used strategically to eliminate federal programs and positions opposed by his administration but supported by Democrats. n n”We can do things during the shutdown that are irreversible for them, that are bad for them and irreversible by them,” Trump said, referring to Democrats. “Like cutting vast numbers of people out, cutting things that they like, cutting programs that they like.”
— News Original —nHow much could a government shutdown cost the economy and taxpayers?n nWashington — The fight over funding the government is likely to be a costly one. n nEach week of the ongoing government shutdown could cost the economy $7 billion and reduce GDP growth by 0.1 percentage points, according to an estimate published by EY-Parthenon chief economist Gregory Daco. That cost is a function of reduced pay for federal employees, delayed government procurement of goods and a decline in demand. n nTo some extent, a portion of that economic cost would be reversed when the government reopens, as furloughed employees receive back pay and economic activity increases, the analysis said. n nIt ‘s likely that not everything would be reversible, though. The last shutdown — which was during President Trump ‘s first term and lasted 34 days, beginning in December 2018 and ending in January 2019 — cost the U.S. economy about $11 billion, according to the Congressional Budget Office. n nDuring that shutdown, the longest on record, the Congressional Budget Office estimated that real gross domestic product in the fourth quarter of 2018 took a $3 billion hit (in 2019 dollars). And it estimated that in the first quarter of 2019, real GDP was “$8 billion lower than it would have been — an effect reflecting both the five-week partial shutdown and the resumption in economic activity once funding resumed.” n nThe shutdown could shake Americans ‘ faith in the economy, too. EY-Parthenon notes that at the time, the 2019 shutdown led to the sharpest monthly drop in the University of Michigan ‘s Consumer Sentiment Index up since 2012. n nSome of the shutdown costs also stem from the administrative effort necessary to create contingency plans when the government is shut down and reopened. Agencies lose user fees collected from visitors to the national parks or from people seeking certain federal permits or visas. And there are higher premiums in federal contracting during a shutdown and the back pay federal employees eventually receive when the government reopens. n nCurrent federal law requires that federal workers be paid at their regular rate, whether they ‘re furloughed or not, once the government is operating again. In a new analysis cited by the White House, the Congressional Budget Office estimates the federal government will pay $400 million a day for furloughed employees, who will not be working during the shutdown. n nA September 2019 report from a Senate Committee on Homeland Security and Governmental Affairs subcommittee estimated the last three government shutdowns in 2013, 2018 and 2019 “cost taxpayers nearly $4 billion — at least $3.7 billion in back pay to furloughed federal workers, and at least $338 million in other costs associated with the shutdowns, including extra administrative work, lost revenue, and late fees on interest payments.” n nThe White House Office of Management and Budget estimated that during the 16-day shutdown of 2013, federal employees received $2.5 billion in pay and benefits for hours they did not work, plus $10 million in penalty interest payments and lost fees. n n2025 shutdown n nBut this time may be different. President Trump, Vice President JD Vance and Russell Vought, the OMB director, say layoffs will happen soon if the shutdown continues, so the net fiscal impact of a shutdown to the federal government is a little harder to predict right now. Vought immediately began freezing or slashing federal funding for projects, largely in blue states, during the shutdown. The Trump administration is withholding $18 billion in infrastructure projects in New York City, and cutting funding for climate-related projects in many states that Kamala Harris won. n nVought also told Republican lawmakers Wednesday that Reduction in Force — or RIF — cuts would begin in two days. n nThe president said Tuesday “a lot of good can come down from shutdowns,” and suggested Vought could use the shutdown to permanently cut federal workers and programs the administration doesn ‘t want but that have the backing of Democrats. n n”We can do things during the shutdown that are irreversible for them, that are bad for them and irreversible by them,” Mr. Trump said of Democrats. “Like cutting vast numbers of people out, cutting things that they like, cutting programs that they like.”