A prolonged government shutdown could push the economy over the edge

"The economic consequences of the current federal government shutdown hinge critically on how long it lasts. If it is resolved quickly, the costs will be small, but if it drags on, it could send the U.S. economy into a tailspin. That's because the economy is already in a precarious state, with the labor market struggling, consumers losing confidence and uncertainty mounting."

"The most recent shutdown, which extended over the 2018-2019 winter holidays and lasted 35 days, was the longest in U.S. history. After it ended, the Congressional Budget Office estimated the partial shutdown delayed approximately US$18 billion in federal discretionary spending, which translated into an $11 billion reduction in real GDP. Most of that lost output was made up later once the shutdown ended, the CBO noted."

A partial federal government shutdown began on Oct. 1, 2025, leaving some funding bills approved, entitlement spending continuing, and certain workers deemed necessary and working unpaid. Short shutdowns have historically caused small GDP hits, but a lengthy shutdown would reduce federal discretionary spending and directly lower real GDP. The 2018–2019 shutdown delayed roughly US$18 billion in discretionary spending and cut an estimated $11 billion from real GDP, with modest permanent losses. Broader indirect effects—falling consumer confidence, mounting uncertainty, and a fragile labor market—could amplify damage and risk tipping the economy into recession if the shutdown persists.

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