CBO Sees Shutdown as an Economic Blip Totaling $3 Billion

The five-week partial shutdown of the U.S. government will ultimately cost the world’s biggest economy just $3 billion, though the closure had indirect effects that are tough to measure, the Congressional Budget Office (CBO) said.

The impasse delayed about $18 billion in federal discretionary spending, the non-partisan arm of Congress said Monday in a report on the shutdown. As a result, the annualized rate of fourth-quarter gross domestic product growth (GDP) is expected to be 0.2 percentage point lower than anticipated, while expansion in the first three months of the year will be 0.4 percentage point weaker, it said.

However, the CBO said most of the lost output “will eventually be recovered,” with second-quarter growth expected to bounce back. The net drop in GDP for the calendar year will amount to $3 billion, or 0.02 percent of annual output, the agency said.

The agency cautioned, however, that its estimates “do not incorporate other, more indirect negative effects of the shutdown, which are more difficult to quantify but were probably becoming more significant as it continued.” That includes businesses that couldn’t get permits or loans, factors that “were probably beginning to lead firms to postpone investment and hiring decisions,” the CBO said.

President Donald Trump on Friday agreed to legislation reopening the government, ending the partial shutdown that began Dec. 22, when he and congressional Democrats clashed over the president’s demand to build a wall along the Mexican border.

From: Bloomberg

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