Analysts Warn: Government Shutdown Could Drain Billions from US Economy Weekly

Senior officials in Donald Trump’s administration are recognizing the risks of a government shutdown, saying it could seriously hurt the US economy. According to experts, the financial fallout could reach billions each week.

Scott Bessent, the US Treasury Secretary, shared his concerns with CNBC. He pointed out that a shutdown isn’t a productive way to negotiate. It could decrease GDP, slow growth, and negatively impact American workers.

A report from EY Parthenon warns that every week the government remains closed could trim 0.1 percentage points from GDP growth in the fourth quarter, equating to about $7 billion in lost economic activity. This decline comes from unpaid federal workers, delays in government contracts, and lower consumer spending.

The Council of Economic Advisers also expressed alarm in a memo acquired by Politico. They estimated that the economic damage could be even worse, possibly causing a loss of $15 billion per week. This could ultimately lead to 43,000 additional jobless Americans if the shutdown lasts for a month.

Consumer spending is expected to fall by $30 billion if the shutdown continues. The memo emphasized that such a scenario could disrupt essential services, including Social Security and nutrition programs for mothers and infants.

Interestingly, while some lost wages may be recovered once the government resumes operations, the long-term effects remain concerning. Prolonged shutdowns can erode confidence in financial markets and delay the release of crucial economic data. This lack of data creates uncertainty for investors and business leaders trying to steer through challenging economic conditions.

Historically, government shutdowns have been costly. The last major shutdown lasted 35 days from late 2018 to early 2019 and is estimated to have cost the economy at least $11 billion, with a permanent loss of $3 billion. This time, the consequences could be equally severe or worse.

Maintaining awareness of these financial impacts could better inform public sentiment and dialogue around government negotiations in the future. The current situation highlights the importance of federal operations for everyday Americans.

For more on how government shutdowns affect daily life, check out this article from The Guardian.



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