What Impact Did Government Shutdown Have On Economy?

There is no positive way to spin the federal government shutdown, no matter what the Tea Party claims.

The two-week shutdown has trimmed about 0.3 percentage point from fourth-quarter growth, or about $12 billion, the forecasting firm Macroeconomic Advisers, based in St. Louis, recently estimated. Standard & Poor’s is more pessimistic, estimating that the shutdown will cut about 0.6 percent off inflation-adjusted gross domestic product, equivalent to $24 billion. Most analysts are predicting that growth will remain subpar, at an annual pace of 2 percent or less.       

Moreover, this latest budget impasse came after years of similar episodes, and the economic ramifications have accumulated over time, analysts say. A new report from Macroeconomic Advisers, prepared for the Peter G. Peterson Foundation, estimates the costs of the fiscal uncertainty of the last few years. Its model suggests that uncertainty since late 2009 has increased certain corporate borrowing costs by 0.38 percentage point; lowered economic growth over that period by 0.3 percent a year, costing at least $150 billion in lost output; and left this year’s unemployment rate higher by 0.6 percentage point. That translates to 900,000 jobs lost.