US Government Shutdown Might Slash Billions from Economy
(MENAFN) The ongoing federal government shutdown in the United States may reduce the American economy by an estimated $7 billion to $14 billion, potentially lowering fourth-quarter gross domestic product (GDP) by as much as 2% due to decreased spending, according to the Congressional Budget Office (CBO) on Wednesday.
As the shutdown reaches its 29th day on Wednesday, there appears to be no resolution in sight. Senate Democrats have pushed for talks to prolong expiring federal tax credits that support Americans with private health insurance under the Affordable Care Act, commonly called Obamacare.
Meanwhile, Senate Republicans urged Democrats to accept a temporary funding plan to maintain government operations through Nov. 21.
The CBO explained that delaying federal spending on goods and services, employee salaries, and nutrition assistance programs like food stamps, which help low-income Americans afford food, could negatively impact economic growth.
"The effects of the shutdown on the economy are uncertain. Those effects depend on decisions made by the Administration throughout the shutdown.
In addition, how federal employees and contractors respond to the delay in compensation is uncertain," the CBO stated.
The CBO estimated that if the shutdown concludes this week, the economy would permanently lose $7 billion.
A six-week shutdown ending Nov. 12 would cost $11 billion, while an eight-week shutdown ending Nov. 26 could reduce economic output by $14 billion.
The labor market would also feel the impact, with the unemployment rate likely to rise.
The Bureau of Labor Statistics (BLS) counts most furloughed federal employees as unemployed or temporarily laid off if they report being furloughed and are not engaged in other temporary work, according to the CBO.
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