Government Shutdown Cost U.S. Economy $11 Billion, C.B.O. Says

Government Shutdown Cost U.S. Economy $11 Billion, C.B.O. Says

WASHINGTON — The five-week federal government shutdown took a significant economic toll, costing the United States economy $11 billion, with nearly a quarter of that total permanently lost, the Congressional Budget Office said on Monday.

The figures are the first official projection of the economic effects of the longest federal shutdown in history, and they show that its cost was nearly double the $5.7 billion request by President Trump for a border wall that fueled the impasse. That is enough to reduce first-quarter growth by about 0.4 percentage points.

Much of that spending was simply delayed, and will flow back into the economy as workers get back pay. But the report makes clear that not all the economic damage will be undone and that the effects of the shutdown will linger. With the federal government funded for just three weeks and Mr. Trump threatening to shutter the government again if his demands for a wall are not met, many workers say they are planning to spend less of their income and increase rainy-day savings.

Kelly Spencer, a federal contractor at the Justice Department, was planning to buy her first home this spring, but as she returned to work on Monday, she said she was shelving those plans.

Ms. Spencer was not paid during the five-week shutdown of the federal government, and as a contractor, she is among the thousands of workers who will not receive back pay. But she said the problem is not just the lost money. She is no longer confident she could make a mortgage payment every month.

“This job was supposed to be stable and secure,” she said. While she had worked hard to pay off her debt and clean up her credit to qualify for a mortgage, she was forced to run up credit card debt again during the shutdown.

Buying a home, she said, “is no longer in the foreseeable future.”

Even those who are getting back pay say they will not return to their previous spending habits, given that another shutdown could happen in a few weeks.

“I don’t feel comfortable going back to the spending levels I had before,” said Tamara Brown, a State Department employee. She received half of her missing pay on Monday, and said she expected the rest later this week. Still, she said, “I’m going to be very conservative until I’m sure this is all over.”

On the chopping block: restaurant lunches and trips to Target.

The report by the nonpartisan budget office said the shutdown, which started in late December and ended Friday, reduced gross domestic product by $3 billion in the fourth quarter of 2018, and by $8 billion in the first quarter of 2019.

The damage caused by the shutdown comes against a gloomy fiscal backdrop. Economic growth already was expected to slow this year. The budget office projected on Monday that real gross domestic product would slow to 2.3 percent in 2019, down from 3.1 percent last year, and that the federal budget deficit would hit $900 billion.

Over the next decade, federal debt held by the public is expected to climb from $16.6 trillion to $28.7 trillion. By 2029 it is expected to reach its highest level as a percentage of gross domestic product since the end of World War II.

The Federal Reserve, which meets this week, has indicated that it plans to pause and take the measure of the economy before considering any additional increases in its benchmark interest rate.

The budget office said growth in subsequent quarters would increase as delayed spending filtered through the economy. However, it estimates that $3 billion will never be recovered. The figure is basically an estimate of the value of the government work that was not performed during the shutdown.

The budget office also said the economy suffered “more indirect negative effects,” which are harder to quantify but stemmed from businesses being unable to obtain permits and certifications and reduced access to federal-backed loans. “Such factors were probably beginning to lead firms to postpone investment and hiring decisions,” the office said.

Morgan Stanley estimated Friday that the shutdown would reduce first-quarter output by 0.5 percentage points, a slightly larger reduction than the budget office projection, although it also predicted most of the loss would be recouped.

Larry Kudlow, the director of Mr. Trump’s National Economic Council, dismissed the C.B.O. report, noting that the budget office regularly has a more pessimistic view of the economy than the White House.

“I won’t acknowledge any of that right now,” Mr. Kudlow said on Monday. “Let’s see how it rolls out.”

Mr. Kudlow argued that it was difficult to make precise projections when analyzing a $20 trillion economy. He said that the stories of individual hardship were problematic, but that the macroeconomic effects of the shutdown would be minimal.

Democrats seized on the report, saying the economic damage should persuade Mr. Trump not to shut down the government again.

“As the dust settles from the Trump shutdown, it is clear as day that the president’s temper tantrum caused serious and lasting damage to our nation’s economy,” said Senator Chuck Schumer of New York, the minority leader.

Senator Mitch McConnell of Kentucky, the majority leader, said on Monday that he did not want to go through another shutdown.

“I think a shutdown is a bad idea, remains a bad idea, and I’m optimistic we will not be in that position yet again,” Mr. McConnell said.

Laura Dodson, an agricultural economist at the Agriculture Department, said the shutdown was particularly stressful because she had just $1,000 in her bank accounts when her paychecks stopped coming. Her rent was coming due, and she needed money to pay for her ovarian cancer treatments.

“The big concern I have is speaking from the standpoint of a millennial, someone in their 20s, is the fear and insecurity,” said Ms. Dodson, 26. “I thought I had a good job with good health insurance and was in a stable spot, but I guess not.”

Ms. Dodson said she planned to more aggressively pay off her credit card debt and loans and make sure that she had a larger cash reserve in case another shutdown came.

“I am pretty worried that if it goes to a second shutdown, it could go on for months,” Ms. Dodson said.

Even with the government open for business on Monday, federal workers who had yet to be paid lined up patiently along Pennsylvania Avenue for free lunches at World Central Kitchen, a nonprofit run by the restaurateur José Andrés that usually serves free meals in communities struck by natural disasters.

Mark Stevens, 37, works at the Superior Court of the District of Columbia, which is funded by the federal government. He said he was furloughed and then called back to work, but he hasn’t been paid in more than a month.

He said he was grateful for the free meal “because I still don’t have any money.”

Mr. Stevens said he had about two months of salary in savings when the government shut down, and his landlord helped out by postponing a rent payment. Even so, he said he had a pile of bills to tackle as soon as he got paid.

Going forward, Mr. Stevens said he intended to sock away six months of salary.

“No more fast food,” said Mr. Stevens, who lives in suburban Maryland. “Less entertainment. No more taking the kids out everywhere.”

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