What impact will the 16-day government shutdown in October have on the U.S. economy? Although some financial experts view the impasse over the budget and the debt ceiling as a temporary glitch, others aren’t as sanguine.
A widely reported calculation by Standard & Poor’s projects that $24 billion was lost due to the first shutdown of the federal government in almost two decades. Thousands of federal workers were furloughed, the tourism industry stalled as national parks were closed, and military families had to endure gaps in child services and other functions. Although federal government employees are entitled to back pay, businesses and employees relying on federal contracts to put bread on the table weren’t as fortunate.
Standard & Poor’s also estimates that the shutdown shaved at least 0.6 of a percent from fourth-quarter gross domestic product growth. Macroeconomic Advisers LLC, an independent economic analyst, reports that congressional budget battles have reduced U.S. economic growth by about 0.3 percentage points a year since 2009, while adding more than a half-point to the 2013 unemployment rate, roughly the equivalent of 900,000 jobs.
The eleventh-hour agreement hammered out by Congress extends government funding only through January 15. We could be bracing for another “economic cliff” shortly.