A federal government shutdown would hinder the economy, waste billions of dollars in federal funds and put a scare in the markets, experts said. It’s already causing a slowdown in normal operations for agencies and businesses.
The Office of Management and Budget estimated in 1996 that the two closures in that fiscal year, which lasted 26 days total, cost the government $1.4 billion, or roughly $2.1 billion in today’s dollars. “I think of it like moving — it costs you to pack, and it costs you to unpack,” said Douglas Holtz-Eakin, president of the American Action Forum think tank and former director of the nonpartisan Congressional Budget Office. “Uninterrupted operations are cheaper than starting and stopping.”
Most of the cost was a result of Congress granting back pay to federal employees who did not work during the closure, but some of it came from the financial toll of winding down operations and ramping them up again, said a 1997 report by University of Maryland Baltimore County political scientist Roy Meyers.
No one knows precisely how much it could cost the private sector in terms of dollars, but it would be worse with a shutdown this year. Alan Chvotkin, executive vice president of the Professional Services Council, said the government spends at least three times more on contracts these days than it did in the mid-1990s. “The magnitude of the impacts would be greater,” he said.
As for the broader economy, Moody’s Analytics chief economist Mark Zandi told the Senate Budget Committee this week that closing down for less than a week would be “no big deal” but that a monthlong stoppage would end up halting fourth-quarter growth.