Analysis: How much would a federal government shutdown cost the economy?

The Congressional Budget Office, a nonpartisan congressional official, released an estimate on October 29 of how much the economy stands to lose from a four-week, six-week and eight-week shutdown. The lockdown is already over four weeks old; If this continues, November 12 will mark six weeks.

Here’s a look at the agency’s calculations — and some potential shortcomings in that number.

What is the expected economic impact of the current lockdown?

The Congressional Budget Office’s estimate says delaying federal spending will lead to short-term economic losses — largely in the fourth quarter of 2025 — that will be mostly recovered during the first quarter of 2026, assuming the shutdown ends by then.

Read more: “You can’t raise $8 billion.” Here’s what to know about SNAP benefits interruption

The Congressional Budget Office projected the extent of the shutdown’s impact on US economic growth for each quarter, after adjusting for inflation and multiplying by four, to convert the quarterly figure to an annual figure. It estimated that a four-week shutdown would reduce fourth-quarter 2025 growth by 1% and that an eight-week shutdown would reduce fourth-quarter growth by 2%.

Most of that lost growth will be made up in the first quarter of 2026, but not all of it, the Congressional Budget Office said. Between $7 billion and $14 billion will be permanently lost, depending on how long the shutdown lasts.

The Congressional Budget Office said much of the permanently lost economic output would stem from reduced production of furloughed employees.

Why might this number be low?

This estimate may be low due to what the CBO assumes when making its calculations.

The agency included four assumptions in its estimates:

• When the lockdown ends, furloughed employees will be paid retroactively.
• When funding resumes, “all spending on goods and services that did not occur during the lockdown will be offset.”
• Active duty military personnel and some law enforcement will continue to be paid during the shutdown.
• When the shutdown ends, lost Supplemental Nutrition Assistance Program benefits will be paid retroactively.

However, in each of these cases, management either proposed doing the opposite or struggled to achieve the goal.

• On October 7, a week after the shutdown began, President Donald Trump said that furloughed federal workers should not necessarily get paid once the shutdown ends and that some workers “don’t deserve” it. The White House wrote a legal opinion claiming that the 2019 law ensuring final pay for furloughed workers is not strict.
• During Trump’s second term, his administration regularly moved unilaterally to cancel spending approved by Congress. Some of these efforts have been blocked in courts, but the shutdown has emboldened the administration. One example of this is its efforts to stop funding the Gateway Tunnel project between New York and New Jersey.
• So far, active-duty military personnel have been paid, and are scheduled to receive their next paychecks on October 31. But the administration was only able to do this by transferring $5.3 billion from research and development funding, from the Pentagon’s procurement account and from an account created under Trump’s big, beautiful law.
• The administration is fighting court efforts to require emergency funding to be used to pay SNAP benefits, which are set to expire on Nov. 1. It is unclear whether the administration will compensate beneficiaries retroactively once the lockdown ends.

Douglas Holtz-Eakin, president of the center-right American Action Forum, said it is fair to assume that if any or all of the CBO’s assumptions ultimately prove incorrect, there could be a much bigger hit to the economy than the agency now expects.

The Congressional Budget Office acknowledged in its analysis that “the effects of the shutdown on the economy are uncertain” and depend on “decisions made by the administration throughout the shutdown.”