Sen. Pete Ricketts, R-Neb., discusses whether Democrats are feeling pressure to impose a government shutdown on ‘Varney & Co.’ to end.
FIRST ON FOX: The US economy could lose up to $14 billion due to the ongoing government shutdown, a new analysis said on Wednesday.
The nonpartisan Congressional Budget Office (CBO) released new forecasts showing that the shutdown will likely have a temporary negative impact on the US economy, although gross domestic product (GDP) – adjusted to remove the effect of inflation – is expected to take a modest permanent hit.
It’s day 29 of the government shutdownwith Democrats and Republicans appearing no closer to an agreement on ending the standoff than when it began on October 1.
House Budget Committee Chairman Jodey Arrington, R-Texas, asked the CBO earlier this month for an analysis of the shutdown’s impact on the U.S. economy.
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House Minority Leader Hakeem Jeffries speaks during a news conference alongside Senate Minority Leader Chuck Schumer after a meeting at the White House in Washington ahead of the government shutdown. (Nathan Posner/Anadolu/Getty Images/Getty Images)
The office sent Arrington an initial response on Oct. 17, saying that “the government shutdown will have negative impacts on the economy, although many of those impacts will be temporary.”
“The effects will increase with a longer shutdown,” according to the first analysis.
The latest analysis looks at three scenarios: a four-week shutdown ending on October 29, a six-week shutdown ending on November 12 and an eight-week shutdown ending on November 26.
“In the CBO’s assessment, the shutdown will slow federal spending and have a negative impact on the economy that will largely, but not entirely, reverse once the shutdown ends,” the analysis said.
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However, CBO forecast that real GDP in the fourth quarter of 2025 will be lower than it otherwise would have been.
“Depending on its duration, the government shutdown will reduce annualized real GDP growth by 1.0 to 2.0 percentage points in that quarter. After the shutdown, real GDP will temporarily be higher than it would otherwise have been,” CBO said.
“While most of the decline in real GDP will eventually be recovered, CBO estimates that between $7 billion and $14 billion (in 2025 dollars) will not happen.”
CBO noted that some variables, including responses to the shutdown by the Trump administration and federal workers affected, still mean the ultimate effects remain to be seen.
Rep. Brendan Boyle, left, a member of the House Budget Committee, speaks with Chairman Rep. Jodey Arrington during a markup meeting on Capitol Hill in Washington, September 20, 2023. (Anna Moneymaker/Getty Images/Getty Images)
“And while Democrats believe that ‘every day gets better for them,’ the same cannot be said for the American people. In fact, a six-week shutdown means growth would be 1.5 percentage points lower, an eight-week shutdown would reduce growth by 2.0 percentage points, and it only gets worse from there.”
Democrats, however, have blamed Republicans for refusing to negotiate with them on a bipartisan solution to end the shutdown and make changes that they say will save health care for millions of Americans.
CBO noted that while many of the economic impacts of the government shutdown will be temporary, “those impacts will intensify the longer the shutdown continues.”
The analysis also noted three factors behind a likely decline in economic activity in late 2025 due to the shutdown: “Fewer services will be provided by federal workers, federal spending on goods and services and SNAP benefits will be temporarily lower, and a temporary reduction in aggregate demand will lower private sector production.”
“Real GDP will recover when federal funding resumes, with most of the lost output making up in the future. The reduction in output resulting from the time laid off workers have been away from work will not be recovered,” the analysis said. “In all three scenarios the agency analyzed, the shutdown will lead to a temporary economic slowdown. Real GDP will be lower in the fourth quarter of 2025 than it would otherwise have been; the reduction in economic activity will increase the longer the shutdown continues.”
However, most of that slowdown will likely be reversed due to “an uptick in federal spending for workers’ compensation, purchases of goods and services, and SNAP benefits that will occur after the shutdown ends.”
The government shutdown is already the second-longest in history after the 2018-2019 shutdown during President Donald Trump’s first term, when Democrats and Republicans disagreed over funding for Trump’s border wall.
That standoff lasted 35 days, just six days longer than the current budget battle.
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Obamacare originated as This time there is a critical divide, with Democrats vowing to reject any funding deal that does not extend the Affordable Care Act (ACA) subsidies that have been bolstered during the COVID-19 pandemic. These subsidies will expire at the end of 2025 without congressional action.
Republican leaders have indicated they are willing to have discussions about extending Obamacare subsidies — albeit with significant reforms — but have declined to tie it to an unrelated federal funding bill.
The Republican Party-led plan, which passed the House of Representatives on September 19, would keep the government’s funding at about the same level as fiscal year (FY) 2025 through November 21. The measure is called a continuing resolution (CR) and is intended to give negotiators time to reach a longer-term deal on FY 2026 funding.
But the CR Failed 13 times in the Senate, where several Democrats are needed to reach the 60-vote threshold to overcome a filibuster.
