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Government shutdown to potentially cost millions

Kristin Myers

Nearly two weeks in and the partial government shutdown shows no signs of ending. This is the third shutdown of the government this year – and under President Trump – and the 21st since modern congressional budgeting began in 1976. That’s more than the previous three presidents had under their belts for their entire presidencies.

In 2013, a 16-day government shutdown was estimated to cost taxpayers roughly $2 billion in lost productivity, according to an Office of Management and Budget (OMB) report. An additional $500 million was lost in visitor spending to national parks.

There were other effects: the report stated that 120,000 fewer private-sector jobs were created due to the shutdown and “consumer and business confidence was badly damaged.”

The current government shutdown is no different — as we hit day 13, it’s clear it will cost American taxpayers millions.

Lost productivity

Roughly 800,000 government employees are affected by the shutdown. About 420,000 are working without pay. But the remaining 380,000 furloughed employees across nine departments are not working.

So what’s the cost of the lost productivity for those workers? With average government salaries for federal civilian employees in 2017 hovering close to $90,000, the current shutdown is costing American taxpayers some $712.5 million a week in lost productivity alone. That’s an increase from earlier cost estimates of over $687 million that used 2016 federal government salary figures.

There’s no word yet whether furloughed federal employees will receive back pay. Congress has approved back pay for employees in previous shutdowns, so It’s likely this trend will continue.

On Dec. 31 a federal employee union sued the federal government, claiming it’s against the law to require some federal employees to work without pay during a shutdown.

“Our members put their lives on the line to keep our country safe,” J. David Cox Sr., national president of the American Federation of Government Employees, said in a statement.

“Requiring them to work without pay is nothing short of inhumane.”

The union won a lawsuit that required the government to pay employees twice their back pay from the 2013 shutdown. If that happens this time around, the federal government would have to shell out an additional $787.5 million a week for the 420,000 employees currently working without pay.

That would bring the total potential cost of this shutdown to $1.5 billion a week from employee salaries alone.

Economic impact

The government shutdown also impacts the economy. A report from S&P estimated that the 2013 shutdown took a $24 billion bite from the economy, shrinking GDP growth by 0.6%. Moody’s Analytics estimated a slightly lower figure: $23 billion.

A current forecast from Moody’s economist Mark Zandi estimates that the shutdown would cut $8.7 billion from the GDP, and shrink economic growth in the first quarter by 0.2%.

While this shutdown happened around the holidays — typically a slow time in government – there could be more stinging consequences if the shutdown drags on much longer.

Then there’s the National Parks Service. Based on 2017’s visitor spending figures, losses jump to just over $700 million so far. The shutdown in 2013 cost the parks service $500 million in lost tourist dollars.

But not all the effects of the government shutdown are as easily calculable, or have immediate financial costs. As the 2013 OMB report points out, the government closure had varying knock-on effects. Business applications and loans were halted, while the 2014 tax season was delayed by two weeks. This shutdown also affects the Department of Treasury, which would handle these applications. Import and export licenses, also handled by Treasury, are currently not being reviewed. In 2013, this meant that more than 2 million liters of American products were stuck in ports, unable to be shipped.

Business and consumer confidence is usually another casualty of a shutdown. A two-week pause won’t have a huge impact, but it could start chipping away at confidence if it drags much longer in January.

In December, the Conference Board consumer expectations index dropped to more than 13 points to 99.1, its lowest reading for 2018. In an analyst note, HSBC’s Ryan Wang notes the decline “may largely be due to the weakness in equity markets over the course of the month, but the onset of the shutdown probably exacerbated the fall.”

He warns that risks to consumer and business confidence could rise if the shutdown lasts beyond mid-January.

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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