Shutdown projected to cause $3B permanent hit to U.S. economy

CBO predicts that just $3 billion in lost gross domestic product will be permanently lost

The federal government shutdown will cause slight permanent harm to the economy — about $3 billion — according to a report Monday by the Congressional Budget Office.

The report says the five-week shutdown has slowed growth in the near term but that most of the lost growth “will eventually be recovered.”

Overall, CBO predicts that just $3 billion in lost gross domestic product will be permanently lost, a modest figure in a $20 trillion-plus economy. By year’s end, CBO says, GDP would be just 0.02 smaller because of the shutdown, which shuttered many domestic agencies. Most of the 800,000 furloughed federal workers are returning to their jobs Monday.

More broadly, the report estimates a drop in GDP growth to 2.3 per cent this year as the effects of President Donald Trump’s tax cut on business investment begin to drop off. It also says that the U.S. budget deficit will hit $897 billion this year.

READ MORE: Workers to get paid ‘in the coming days’

The CBO credits the 2017 tax bill — which cut corporate and individual income taxes by $1.9 trillion over a decade — with a burst in growth last year, but it says that this year “the boost that recent tax legislation gave to business wanes.”

The report comes as the government is reopening after a 35-day partial shutdown. The CBO says the shutdown will have a modest negative impact on the economy, lowering projections of economic growth by 0.4 percentage points to 2.1 per cent in the first quarter, though the economy is expected to mostly make up for it over the rest of the year.

“The shutdown dampened economic activity mainly because of the loss of furloughed federal workers’ contribution to (gross domestic product), the delay in federal spending on goods and services, and the reduction in aggregate demand,” the report said.

“Underlying those effects on the overall economy are much more significant effects on individual businesses and workers,” CBO said. “Among those who experienced the largest and most direct negative effects are federal workers who faced delayed compensation and private-sector entities that lost business. Some of those private-sector entities will never recoup that lost income.”

The CBO Report predicts a $118 billion increase over last year’s $779 billion deficit. It predicts that the economy will grow by 2.3 per cent this year, a slowdown from 3.1 per cent last year. Unemployment would fall to 3.5 per cent in the second half of the year, its lowest point since the 1960s.

READ MORE: Trump announces deal to end record-long shutdown

The report lands in a divided Washington, where neither Trump nor Democrats controlling the House are expected to make curbing the deficit a priority. In fact, Trump and lawmakers are likely to increase spending for the Pentagon and other federal agencies, which would otherwise face cuts from outdated budget caps that are the remnant of the 2011 budget deal. And Congress is ultimately going to face pressure to make permanent provisions of the 2017 tax cuts for individuals that would otherwise expire in 2025.

“Republicans’ massive tax giveaway to millionaires and big corporations is inflicting serious damage on our budget outlook,” said House Budget Committee Chairman John Yarmuth, D-Ky. “We are facing trillion-dollar deficits and an increasingly bleak fiscal future.”

The agency also predicts that Trump’s trade policies — higher tariffs on Chinese goods and products such as imported steel — would have only a relatively modest negative impact on the economy.

Andrew Taylor, The Associated Press

Like us on Facebook and follow us on Twitter.

Just Posted

BREAKING: Emergency crews responding to house fire in Alkali Lake area

Williams Lake RCMP received the call at about 6 a.m.

Proposed solar feasibility study focus of upcoming open house in McLeese Lake

An application for the study is presently under review by FLNRORD

Fire risk-reduction projects set for Williams Lake area

Preliminary fieldwork began in fall 2019 and will continue periodically for the next two years

Ice, ice, baby: Rain and snow makes for slippery roads in the Cariboo Chilcotin

Heavy rains Tuesday evening followed by snow and below freezing temperatures overnight… Continue reading

Wrestling Day 2020 approved by Williams Lake city council

The uniqe public municipal holiday dates back eight decades

VIDEO: A brief history of bumps in the Trudeau-Trump relationship

Remember Peter Navarro saying ‘there’s a special place in hell’ for a foreign leader who aims to cheat?

Half of shoppers say they have no holiday spending budget

B.C. consumers surveyed estimate they will spend $921 this season

Man killed in crash due to ‘absolutely treacherous’ conditions on Coquihalla

Winter means icy roads are dangerous and drivers should be careful, RCMP say

Bag of cocaine left in B.C. grocery store aisle

RCMP: ‘We sure would like to talk to’ person who left drugs behind

Former Burns Lake mayor gets two years for sexual assaults against minors

The Crown is seeking four to six years federal time; the defence wants 18 months in provincial jail

RCMP officer was justified using hose in rooftop standoff: B.C. watchdog

Police watchdog finds officers actions reasonable when man injured in 2018 incident

Cannabis ice cream? Province prepares for B.C. Bud edibles

Mike Farnworth’s special police unit takes down dispensaries

Union for parole officers at B.C. halfway house says public safety at risk

Increase in parole officers’ workload dealing with highest-risk offenders raises concern

B.C. bans logging in sensitive Silverdaisy area in Skagit River Valley

Minister says no more timber licences will be awarded for the area, also known as the ‘doughnut hole’

Most Read