Economic Impact of Federal Government Shutdown Estimated at $7-14 Billion

Strategic Insights -

The federal government shutdown will temporarily lower the country's gross domestic product by one to two percentage points in the fourth quarter of 2025, resulting in a loss of between $7 billion and $14 billion, according to a report by the Congressional Budget Office. The economic impact will mostly reverse once the government reopens, but the hours lost by furloughed federal workers will permanently affect real GDP, leading to a more significant loss the longer the shutdown lasts.

Key Takeaways:

  • The federal government shutdown is expected to temporarily lower GDP by one to two percentage points in the fourth quarter of 2025.
  • The shutdown will result in a loss of between $7 billion and $14 billion to the US economy, with the longer the shutdown lasts, the more significant the loss will be.
  • Around 750,000 federal workers have been temporarily furloughed as a result of the funding impasse, while others are working without pay.
  • The shutdown will soon become more painful for those who aren't federal employees, with SNAP benefits set to temporarily halt in states that cannot make up the difference.
  • The hours lost by furloughed federal workers will permanently affect real GDP, leading to a permanent loss of $7 billion to $11 billion by the end of 2026.
  • If the shutdown lasts until the end of November, the economy will permanently lose $14 billion in GDP by the end of 2026.

Statistics:

  • The federal government shutdown is expected to result in a loss of between $7 billion and $14 billion to the US economy.
  • The shutdown will temporarily lower GDP by one to two percentage points in the fourth quarter of 2025.
  • Around 750,000 federal workers have been temporarily furloughed as a result of the funding impasse.
  • SNAP benefits are set to temporarily halt in states that cannot make up the difference.
  • The permanent loss due to the shutdown will be $7 billion to $14 billion by the end of 2026, depending on the duration of the shutdown.
  • The economy will permanently lose 1% to 2% of its GDP in the fourth quarter of 2025 due to the shutdown.

Sources:

  • Congressional Budget Office (2022). "The Economic Impact of a Government Shutdown."
  • Congressman Jodey Arrington (2022). Press statement.
  • Congressman Brendan Boyle (2022). Press statement.
  • White House Press Release (2022).