How much will a government shutdown cost?

The Takeaway

This story was originally covered by PRI’s The Takeaway. For more, listen to the audio above.

In November 1995, the US federal government shut down briefly and 800,000 federal employees were furloughed. About 284,000 workers were sent home in a second shutdown a month later. It’s estimated that those shutdowns cost the government some $1.4 billion. And at that point, the economy was much stronger than it is now.

Economic logic would say that the government won’t shut down again, according to Mark Zandi, the chief economist at Moody’s, “but of course this is politics, and given that I think it’s impossible to predict.”

“Any shutdown is disruptive, it’s disconcerting,” Zandi told PRI’s The Takeaway. “I think people are already nervous.” A short shutdown wouldn’t be so bad. If the current debate gets mixed in with a debate over raising the debt ceiling, however, there’s a chance that the shutdown could get quite a bit worse. Zandi says, “you could construct scenarios where it would go on for quite some time.”

A longer shutdown could seriously hurt the American economy. “Not being able to raise the debt ceiling in a timely way I think would be very disturbing to global investors and remind them that this nation has very large budget deficits and a very heavy debt load,” Zandi says. “I don’t think that would be a very good path to go down, I don’t think it would be in our best interest.”

The people most hurt by a shutdown could be the country’s poor. “A lot of people are unaware of the fact that a huge portion of state spending is actually federal spending,” Scott Pattison, executive Director of the National Association of State Budget Officers, told The Takeaway. That could mean a disruption to temporary assistance to needy families.

States may be hesitant to make up for the loss of spending, because they don’t know if they’ll get paid back. “We’re very concerned that we’re going to have to put out the cash,” Pattison said. “The question is, will we be repaid for that for what otherwise would have been federal monies for a federal program.”

It’s probably a good thing to have people debating the budget and getting the federal government back on a sustainable path, Zandi admits, but a shutdown could spook global investors.

“Shutting down the government seems to be quite extreme and it would highlight, I think, the fact that we just can’t come to any form of agreement, that there is no political compromise, that we can’t figure this out,” Zandi says. “Having the discussion is great, but at this point I think we need to figure out a way to come together and keep the government in operation and moving forward.”

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The Takeaway” is a national morning news program, delivering the news and analysis you need to catch up, start your day, and prepare for what’s ahead. The show is a co-production of WNYC and PRI, in editorial collaboration with the BBC, The New York Times Radio, and WGBH.

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