Just the Facts

Five Facts on The Economic Consequences of The Government Shutdown

By No Labels
January 29, 2019 | Blog

Here are five facts on the economic consequences of the government shutdown.

The nonpartisan Congressional Budget Office (CBO) estimated that the shutdown reduced the United States’ Gross Domestic Product (GDP) by $11 billion.

The loss was spread out over the fourth quarter of 2018, when approximately $3 billion was lost, and the first quarter of 2019, which saw a reduction of $8 billion. Much of this economic slowdown was because of the roughly 380,000 furloughed workers who weren’t contributing to GDP,

as well as the delay in federal spending on goods and services. In addition, the CBO stated that their estimates did not incorporate other negative effects of the shutdown, such as businesses that weren’t able to obtain federal permits or access loans while the government was shuttered.

The economy is expected to make up most of the $11 billion, but the CBO estimated that $3 billion will never be recovered.

As the shuttered portions of the government begin to slowly pick up steam, they will be able to make up for some of the lost time; federal workers will receive back pay, contracts will once again be paid out, and government spending on goods and services will resume. However, despite all of this $3 billion dollars, or 0.02% of projected annual GDP in 2019, will never be recovered. The economic loss amounts to more than half of the $5.7 billion that President Trump requested for the border wall.

All 800,000 federal workers affected by the shutdown will receive back pay.

Approximately 420,000 of the government workers affected by the shutdown were deemed essential, meaning that they worked without pay while the government was shuttered.  However, this also meant that they were guaranteed back pay when the government eventually opened. For the other 380,000 workers who were forced to stay home during the shutdown, there were questions as to whether they would receive back pay. Fortunately, in early January, as the shutdown stretched into its third week, Congress voted overwhelmingly to approve back pay for all federal workers forced to stay home due to the shutdown.

Thousands of contractors working for the federal government—many of them the lowest paid workers in the government economy—will not receive back pay. 

These workers, many of whom work relatively low-wage jobs as janitors, cooks, or security guards, are not entitled to a single penny of back pay under federal law. These jobs generally pay about $450 to $650 a week, leaving workers to face serious financial crisis after missing approximately five weeks of pay. While there is some hope, as a trio of Democratic senators — Mark Warner (D-VA), Sherrod Brown (D-OH), and Tim Kaine (D-VA) — have introduced a bill that would repay contracted workers up to $965 a week, it is unclear whether it will pass.

Lawmakers have introduced several bills designed to end the practice of government shutdowns.

On January 22 Sen. Warner introduced the “Stop STUPIDITY Act,” which would automatically renew the most recent funding level for most departments and agencies if Congress is unable to pass a new budget. In addition, Reps. Elissa Slotkin (D-MI), Chrissy Houlahan (D-PA), Dean Phillips (D-MN) and Colin Allred (D-TX), are leading a group of House freshmen lawmakers in introducing the “SEAS Act,” which would transfer the financial hardships that government workers endure to the people with the capability to end the shutdown, such as those in the executive and legislative branches.

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