OMB Says Shutdown Trimmed Growth as Furloughs Cost $2 BillionLisa Lerer
The partial government shutdown last month cost the government about $2 billion in lost productivity because of employee furloughs and will trim economic growth by as much as 0.6 percentage point in the fourth quarter, the White House budget office reported today.
The 16-day closing of most government operations, resulting from a standoff between the White House and congressional Republicans over the budget and raising the federal debt ceiling, had ripple effects throughout the U.S. economy from stalled drilling permits and small business loans to export licenses put on hold, according to the Office of Management and Budget report.
The analysis of data and private forecasts was released as lawmakers from both parties are negotiating a budget agreement before the current spending authorization expires on Jan. 15.
“The most important thing to avoid a shutdown is to pass a budget,” OMB Director Sylvia Mathews Burwell said on a conference call today. “That is the way to prevent something like this from happening again.”
The shutdown was the second longest since 1980 and the biggest in terms of employee furlough days, the OMB said.
The OMB cited private forecasts that the shutdown will reduce fourth quarter gross domestic product growth by 0.2 percentage point to 0.6 percentage point.
The report lists some of the economic impacts of federal workers being off the job, including stalling 200 drilling applications, delaying energy development on federal lands, and leaving 2 million liters of U.S. beer, wine and distilled spirits products sitting at ports.
Closing the national parks and Smithsonian museums led to more than $500 million in lost visitor spending and $11 million in lost revenue from admission fees, the report said.
The shutdown began as the economy accelerated more than forecast in the third quarter. Gross domestic product rose at a 2.8 percent annualized rate after a 2.5 percent gain the prior three months, according to a Commerce Department report.
U.S. stocks slid as faster growth spurred concern the Federal Reserve will scale back stimulus sooner than expected. The Standard & Poor’s 500 Index declined 1.3 percent to 1,748.08 at 3:34 p.m. in New York, its worst drop on a closing basis since August.
The gain was driven by a buildup in inventories as household consumption, which accounts for 70 percent of the economy, and business spending on equipment slowed during the period. That risks holding back production and the economy in the current quarter, which began with the 16-day partial shutdown of the government.
Economic growth this quarter will be less than economists projected at the start of the shutdown. GDP will expand at a 2 percent annualized rate, according to the median projection in a Bloomberg survey on Oct. 31, down from a 2.4 percent forecast in an Oct. 4-9 survey.
Jobs data set for release tomorrow are projected to show hiring slowed in October.
The Bloomberg Consumer Comfort Index declined for the sixth week in a row, falling to minus 37.9 in the week ended Nov. 3, the worst reading since October 2012, from minus 37.6.