U.S. lost billions in shutdown

Posted Friday, Oct. 18, 2013  comments  Print Reprints
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The full economic effect of the first government shutdown in almost 20 years will take months to tally, but the overall impact on the economy was at least $24 billion.

That’s the estimate from Beth Ann Bovino, an economist at Standard & Poor’s. There’s no question the shutdown’s impact is substantial in key areas of the economy. Spending at chain retail stores fell 0.7 percent last week. Mortgage applications dropped 5 percent. Auto sales slumped about 2 percent.

The other estimated losses include $152 million per day in travel spending and $76 million in daily visitor spending at national parks in 12 states.

Still, the pain could have been worse. For one thing, furloughed government workers will receive back pay. They and other Americans who delayed making large purchases the past couple of weeks could step up spending in coming months.

But the economic and political chaos that resulted from the shutdown is something that leaders at the White House and in Congress say they do not want to repeat.

President Barack Obama applauded the return of federal workers Thursday after the 16-day shutdown, calling for an end to the partisan rift that “inflicted completely unnecessary damage” on the economy.

Speaking at the White House hours after he signed legislation that reopened national parks and put federal inspectors back on the job, Obama called for a change in Washington’s political climate.

“To all my friends in Congress, understand that how business is done in this town has to change because we’ve all got a lot of work to do on behalf of the American people, and that includes the hard work of regaining their trust,” Obama said. “There’s no good reason why we can’t govern responsibly, despite our differences, without lurching from manufactured crisis to manufactured crisis.”

He had a pointed message for Republicans who had pushed to repeal his signature healthcare law in exchange for funding the government, saying, “You don’t like a particular policy, or a particular president, then argue for your position. Go out there and win an election.”

He called on Washington to “stop focusing on the lobbyists and the bloggers and the talking heads on radio and the professional activists who profit from conflict, and focus on what the majority of Americans sent us here to do.”

He laid out three priorities: hammering out a long-range budget, overhauling immigration laws and passing a farm bill that has stalled amid deep partisan differences.

“Those are three specific things that would make a huge difference in our economy right now, and we could get them done by the end of the year — if our focus is on what’s good for the American people,” he said.

Compromise has long eluded the administration and Congress on a host of issues, but top budget negotiators met for breakfast Thursday, insisting that this time will be different.

After all, said Rep. Chris Van Hollen of Maryland, the top House Budget Committee Democrat, “not talking guarantees failure. Talking doesn’t guarantee success, but if you don’t get together, obviously, you can’t move forward.”

Sen. Jeff Sessions of Alabama, the top Republican on the Senate Budget Committee, also sounded a note of cooperation: “There’s a lot we can do, a number of things I know we can agree on and I hope we could agree on.”

But Sen. Ted Cruz, R-Texas, remained defiant and refused to rule out supporting another shutdown.

“I will continue to do anything to stop the train wreck that is Obamacare,” Cruz told ABC News on Thursday. Pressed on whether he would rule out a second shutdown, he said only that he will “stand with the American people working to stop Obamacare.”

Democrats and Republicans disagree on spending levels for discretionary items, or items Congress can largely control. Republicans want to spend roughly $967 billion this year. Democrats are about $90 billion higher.

The last time the two parties tried long-range budget talks, in 2011, they went nowhere.

But Senate Budget Committee Chairwoman Patty Murray, D-Wash., said the goals are attainable. “Our job is to make sure that we have put forward a spending cap and a budget path for this Congress in the next year or two, or further if we can,” she said.

Advocates for an immigration overhaul cheered Obama’s remarks, but it’s unclear whether frayed relations between Senate Democrats and House Republicans preclude a compromise.

The Democratic-led Senate passed legislation over the summer that would put the nation’s 11 million illegal immigrants on a path to citizenship. But many House Republicans oppose a sweeping approach and would prefer narrower bills with no path to citizenship, which many liken to “amnesty” for people here illegally.

Likewise, the two chambers have huge differences over the farm bill. House and Senate members are poised begin work in a conference committee as early as next week to reconcile differences in farm legislation that each chamber passed.

The House bill contains nearly $40 billion in cuts over 10 years in the Supplemental Nutrition Assistance Program, known as food stamps. The program serves about 48 million low-income Americans. The House bill would cause about 3 million people to lose benefits.

The Senate bill, by contrast, seeks to cut only $4.5 billion in spending from food stamps. The House-Senate conference could be a raucous affair, with personalities like conservative Rep. Steve King, R-Iowa, and blunt Rep. Marcia Fudge, D-Ohio, chairwoman of the Congressional Black Caucus.

Pricetag: $24 billion

The full economic effect of the 16-day partial government shutdown will take months to tally. But it’s already clear it left its footprints in key areas of the economy.

Spending at chain retail stores fell 0.7 percent last week. Mortgage applications dropped 5 percent. Auto sales slumped about 2 percent.

Overall, the shutdown cost the U.S. economy $24 billion, according to Beth Ann Bovino, an economist at Standard & Poor’s. That’s why she’s cut her forecast for growth in the October-December quarter to a 2.4 percent annual rate from an earlier estimate of 3 percent. Other economists have also downgraded their outlooks.

Other effects

The measure Obama signed into law early Thursday guarantees federal workers back pay for time spent at home, aids flood-ravaged Colorado and provides extra cash for fighting wildfires in the West.

And it grants the Washington, D.C., government, which relies on Congress to approve its budget, authority to manage its own affairs through fiscal 2014.

Another effect of the bill — a noteworthy one for the public in the age of social media — is the resumption of the panda cams, which show a live feed of Mei Xiang and her cub at the National Zoo.

This report includes material from McClatchy Newspapers, The Associated Press and The Washington Post.

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