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U.S. Partial Shutdown: Billions Lost Of Which $3 billion Will Never Be Recovered

Unic Press UK: The Congressional Budget Office (CBO), a nonpartisan body that provides analysis for the United States Congress, estimates that the recent partial shutdown cost the U.S. economy circa $11 billion of which $3 billion will never be recovered.

In its report the CBO said that the shutdown had “dampened economic activity mainly because of the loss of furloughed federal workers’ contribution to GDP, the delay in federal spending on goods and services, and the reduction in aggregate demand (which thereby dampened private-sector activity.”

In its summary of the report ‘The Effects of the Partial Shutdown Ending in January 2019’ the CBO said:

  • The 5-week shutdown delayed approximately $18 billion in federal discretionary spending for compensation and purchases of goods and services and suspended some federal services.
  • Due to reduced economic activity during the period, the real (that is, inflation adjusted) gross domestic product (GDP) in the fourth quarter of 2018 was reduced by $3 billion (in 2019 dollars) in relation to what it would have been otherwise. In the first quarter of 2019, the level of real GDP is estimated to be $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.
  • As a share of quarterly real GDP, the level of real GDP in the fourth quarter of 2018 was reduced by 0.1 percent. And the level of real GDP in the first quarter of 2019 is expected to be reduced by 0.2 percent.
  • Although most of the real GDP lost during the fourth quarter of 2018 and the first quarter of 2019 will eventually be recovered, CBO estimates that about $3 billion will not be. That amount equals 0.02 percent of projected annual GDP in 2019. In other words, the level of GDP for the full calendar year is expected to be 0.02 percent smaller than it would have been otherwise.

The partial shutdown of the U.S. government lasted 35 days, from December 22, 2018 to January 25, 2019.

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