The Effects of the Partial Shutdown

Ending in January 2019

Summary

The Congressional Budget Office has estimated the effects of the five-week partial 

shutdown of the government that started on December 22, 2018, and ended on 

January 25, 2019. This report presents CBO’s findings, which include the following:

 CBO estimates that the five-week shutdown delayed approximately $18 billion 

in federal discretionary spending for compensation and purchases of goods and 

services and suspended some federal services.

 As a result of reduced economic activity, CBO estimates, real (that is, inflationadjusted) gross domestic product (GDP) in the fourth quarter of 2018 was 

reduced by $3 billion (in 2019 dollars) in relation to what it would have been 

otherwise. (Such references are in calendar years or quarters unless this report 

specifies otherwise.) In the first quarter of 2019, the level of real GDP is 

estimated to be $8 billion lower than it would have been—an effect reflecting 

both the five-week partial shutdown and the resumption in economic activity 

once funding resumed. 

 As a share of quarterly real GDP, the level of real GDP in the fourth quarter of 

2018 was reduced by 0.1 percent, CBO estimates. And the level of real GDP in 

the first quarter of 2019 is expected to be reduced by 0.2 percent.1 (The effect 

on the annualized quarterly growth rate in those quarters will be larger.)2

 In subsequent quarters, GDP will be temporarily higher than it would have been 

in the absence of a shutdown. Although most of the real GDP lost during the 

fourth quarter of 2018 and the first quarter of 2019 will eventually be recovered, 

CBO estimates that about $3 billion will not be. That amount equals 

0.02 percent of projected annual GDP in 2019. In other words, the level of GDP 

 

1 The economic forecast that CBO released in The Budget and Economic Outlook: 2019 to 2029 was 

completed before the partial shutdown of the federal government began. Therefore, that forecast does not 

incorporate any of the shutdown’s economic effects. See Congressional Budget Office, The Budget and 

Economic Outlook: 2019 to 2029 (January 2019), www.cbo.gov/publication/54918.

2 To annualize an amount is to adjust it so that it applies to an entire year.

JANUARY 2019
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for the full calendar year is expected to be 0.02 percent smaller than it would 

have been otherwise.

 Underlying those effects on the overall economy are much more significant 

effects on individual businesses and workers. Among those who experienced the 

largest and most direct negative effects are federal workers who faced delayed 

compensation and private-sector entities that lost business. Some of those 

private-sector entities will never recoup that lost income.

 All of the estimated effects and their timing are subject to considerable 

uncertainty. In particular, CBO is uncertain about how much discretionary 

spending was affected by the partial shutdown, how affected federal employees 

and contractors adjusted their spending in response to delayed compensation, 

and how agencies will adjust their spending on goods and services now that 

funding has resumed.

In CBO’s estimation, the shutdown dampened economic activity mainly because of the 

loss of furloughed federal workers’ contribution to GDP, the delay in federal spending on 

goods and services, and the reduction in aggregate demand (which thereby dampened 

private-sector activity).3

CBO’s estimates do not incorporate other, more indirect negative effects of the shutdown, 

which are more difficult to quantify but were probably becoming more significant as it 

continued. For example, some businesses could not obtain federal permits and 

certifications, and others faced reduced access to loans provided by the federal 

government. Such factors were probably beginning to lead firms to postpone investment 

and hiring decisions. In addition, risks to the economy were becoming increasingly 

significant as the shutdown continued. Although their precise effects on economic output 

are uncertain, the negative effects of such factors would have become increasingly 

important if the partial shutdown had extended beyond five weeks.

Background

CBO estimates that net discretionary funding for the agencies that were affected by the 

shutdown totals $329 billion in fiscal year 2019, or about 25 percent of the total 

discretionary funding for the federal government. That total reflects the annualized 

amounts of funding provided in the Continuing Appropriations Act, 2019 (Public Law 

115-245), which expired on December 22, 2018. Additional appropriations were not 

provided until January 25, 2019 (35 days later), when H.J. Res. 28 was enacted, which 

extended the levels of funding provided in P.L. 115-245 through February 15, 2019.

The funding lapse affected discretionary activities in the judicial branch and the 

following departments and agencies in the executive branch: the Department of 

Agriculture, the Department of Commerce, the Department of Homeland Security, the 

 

3 In CBO’s estimates, workers who were required to continue to work at agencies that did not have funding 

contributed to real GDP during the shutdown, while furloughed workers did not—an approach that accords 

with the methods typically used by the Bureau of Economic Analysis to measure real GDP.
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Department of Housing and Urban Development, the Department of the Interior, the 

Department of Justice, the Department of State (and the related international assistance 

programs), the Department of Transportation, the Department of the Treasury, the 

Environmental Protection Agency, the National Aeronautics and Space Administration, 

and the National Science Foundation. Some smaller agencies were affected as well.

When agencies do not receive appropriations, their employees are required to stop 

working on any activities normally funded by those appropriations—unless an employee

is excepted to perform a particular task.4 Such tasks are defined in an agency’s 

contingency plan in accordance with guidance from the Office of Management and 

Budget (OMB) and the Department of Justice.

5 Excepted employees (often referred to as 

essential employees) are required to carry out activities for the protection of life or 

property, as well as other activities defined in the agency’s plan. They are generally not 

paid for the hours that they work until their agency receives an appropriation. Employees 

of the agencies who are not excepted are furloughed. The recently enacted Government 

Employee Fair Treatment Act of 2019 guaranteed that furloughed employees will receive 

back pay with the resumption in funding.

6

Agencies without appropriations also are constrained in what goods and services they can 

purchase. For example, many contractors are not permitted to provide services to federal 

agencies that have not received appropriations. In addition, employees at those agencies 

generally cannot travel for work or participate in training events. 

Also, without an appropriation, an agency has no current funding to make grants, provide 

subsidies, or otherwise make payments to individuals through a variety of benefit 

programs unless those services are considered essential under the agency’s contingency 

plan. During the partial shutdown that ended on January 25, however, some agencies 

without current-year appropriations continued to make grants, subsidies, and other 

transfers, using funding that had been appropriated in earlier years and was available for 

obligation.7 Because CBO did not observe a significant drop-off in those payments 

 

4 See the Antideficiency Act, 31 U.S.C. §1341 et seq.

5 See Office of Management and Budget, Apportionment of Obligational Authority for Necessary Agency 

Operations in the Absence of Fiscal Year 2019 Appropriations, OMB Bulletin 19-02 (December 2018), 

https://go.usa.gov/xEBYk.

6 See the Government Employee Fair Treatment Act of 2019, S. 24, as signed by the President on 

January 16, 2019. The law states that furloughed employees shall be paid at the earliest possible date after 

appropriations have been provided, but it does not provide an appropriation to pay for those costs. That 

funding was provided on January 25 in H.J. Res. 28.

7 The period of availability of discretionary appropriations is the span during which the budget authority 

provided in annual appropriation acts is generally available for obligation. Discretionary budget authority 

usually is designated as annual (expiring after one year), multiyear (expiring after a specified number of 

years), or no-year (remaining available until expended). In 2017, 49 percent of discretionary appropriations 

for that year was made available for more than one year, and 15 percent was made available indefinitely. 

For additional information, see Congressional Budget Office, letter to the Honorable Steve Womack 

describing the period of availability of appropriated funds (May 21, 2018), 

www.cbo.gov/publication/54155. 
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during the partial shutdown, it did not incorporate any reductions in those payments into 

the analysis described here. 

Using information from the Administration, CBO estimates that the federal civilian 

workforce totals about 2.1 million workers and that about 800,000 of them (or about 

40 percent) are employed at agencies that lacked an appropriation during the partial 

shutdown.

8 The weekly compensation costs for workers at agencies that were without an 

appropriation totaled roughly $1.8 billion, or about 40 percent of total compensation for 

federal workers.

Of those 800,000 employees, CBO estimates, about 300,000 (or 38 percent of employees

at agencies without an appropriation) were furloughed during the shutdown. That 

estimate is not precise, in part because OMB’s guidance about who should work during 

the shutdown changed over time.

Effects on the Federal Budget

Because of the five-week partial shutdown, federal outlays, revenues, and other 

collections were lower than they would have been otherwise. With the resumption of 

funding, CBO expects that nearly all of the spending that did not occur during the 

shutdown will be made up but that the government will probably not fully recoup all of 

the revenues and other collections that it lost during the shutdown.

Spending

The affected departments’ and agencies’ spending can be divided into two categories: 

employees’ compensation and purchases of goods and services.

Employees’ Compensation. CBO estimates that federal outlays for employees’ 

compensation were reduced by about $9 billion during the shutdown from what they 

would have been otherwise. Of that total, about $3 billion represents compensation for 

furloughed employees, and $6 billion represents compensation for excepted employees

who were required to work even though their compensation was delayed (see Table 1).

Given the recent appropriation for funding for back pay for all affected federal 

employees, CBO expects that federal compensation will be boosted by the same 

$9 billion over February and March. Federal compensation will be otherwise unaffected 

by the shutdown, in CBO’s assessment.

9

 

8 That information includes data from the Office of Personnel Management’s online database called 

FedScope, www.fedscope.opm.gov/; object-class data from Budget of the U.S. Government, Fiscal Year 

2019: Budget Appendix (February 2018), www.whitehouse.gov/omb/appendix/; and employment 

information from the publicly available shutdown contingency plans for the affected agencies.

9 Some anecdotal evidence suggests that some agencies that did not have current-year funding during the 

partial shutdown paid workers with remaining balances from earlier years. CBO did not incorporate such 

payments into the estimates here.
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Table 1.

Near-Term Reduction in Federal Expenditures From the Partial Shutdown Lasting From 

December 22, 2018, to January 25, 2019

Billions of Dollars

December 

2018

January

2019 Total

Compensation for Employees in Agencies Without 

Funding 3a 6 9

Compensation for furloughed employees 1a 2 3

Compensation for excepted employees 2a 4 6

Spending on Goods and Services 3 7 9

Total Reduction in Federal Expenditures 5 13 18

Numbers may not add up to totals because of rounding.

a. Most of the compensation for federal workers at agencies without funding that was accrued in 

December 2018 would normally have been paid in January 2019.

Spending on Goods and Services. CBO estimates that federal spending on goods and 

services was about $9 billion lower during the five-week shutdown than it would have 

been otherwise. Nearly all of that reduction will, CBO expects, be made up within the 

first three quarters of calendar year 2019 (which are the remainder of the fiscal year)—

because agencies will try to make use of their current-year funding before the end of the 

fiscal year. Specifically, CBO estimates that one-third of the reduction will be made up in 

each of the first, second, and third quarters of the calendar year. (Agencies will probably 

purchase a different mix of goods and services than they had initially planned, however.) 

Federal spending on goods and services will otherwise be unaffected by the five-week 

shutdown, in CBO’s assessment. 

Revenues and Collections

The delay in salary payments to federal employees during the five-week shutdown will 

alter the timing of tax revenues. Receipts from withheld payroll and individual income 

taxes will have fallen during the shutdown and will then be recouped with the resumption 

in funding. Because of the progressive nature of the individual income tax, some federal 

employees will have additional tax withheld when they receive their back pay in a lump 

sum. Unless those employees alter their withholding or estimated tax payments, that

additional withholding will result in slightly higher revenues in fiscal year 2019. But that 

effect will be offset in fiscal year 2020, when those employees file their taxes and 

reconcile their liability and payments from 2019. The reduction in economic activity 

early in fiscal year 2019 and the subsequent boost in activity later in the year—which are 

discussed below—might also slightly alter the timing of tax revenues.

The five-week shutdown also affected the collection of some fees and fines. In most 

cases, only the timing was affected, because fees not collected during the shutdown will 

be collected with the resumption in funding. Examples include fees collected by the 

Securities and Exchange Commission and the Federal Trade Commission. In other cases, 

collections will be permanently lost, because some fees are associated with economic 

activity that, in CBO’s assessment, will not occur, such as some visits to national parks 
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that were canceled. However, permanently lost collections from the five-week shutdown 

will be small. For example, the fees to enter national parks and other federal recreational 

areas amount to roughly $500 million in a full year. 

Finally, as a result of some reduced activities by the Internal Revenue Service (IRS) that 

are meant to ensure taxpayers’ compliance with tax law, CBO estimates that tax revenues 

will be roughly $2 billion lower in fiscal year 2019 because of the shutdown. With the 

resumption of the IRS’s activities, tax revenues will return to the levels expected in the 

absence of the shutdown. However, CBO estimates that much of the lost revenue from 

those forgone compliance activities will not be recouped. 

Macroeconomic Effects

CBO estimates that the five-week partial government shutdown temporarily reduced the 

level of real GDP. That decrease happened in three ways: Services were not provided by 

federal workers, federal spending on goods and services was temporarily lower, and a 

temporary reduction in aggregate demand lowered output in the private sector. Even 

though GDP is expected to rebound with the resumption in funding, some lost GDP will 

not be recovered. In addition, the shutdown will have small and temporary effects on 

aggregate measures of the labor market. 

Underlying those effects on the overall economy, however, are much more significant 

distributional effects—that is, effects that redistribute income from some producers of 

goods and services to others. Indeed, some people and businesses experienced 

significantly negative effects. All of the estimated effects and their timing are subject to 

considerable uncertainty. 

Effects on Real GDP

CBO estimates that the partial shutdown made the level of real GDP in the fourth quarter 

of 2018 a little less than 0.1 percent lower than it would have been in the absence of the 

shutdown. CBO also estimates that the shutdown and the subsequent rebound in federal 

spending beginning in February will reduce real GDP by about 0.2 percent in the first 

quarter of 2019, boost it by 0.1 percent in each of the second and third quarters of 2019, 

and then boost it slightly in the fourth quarter (see Table 2). 

The negative effects on GDP will be only partially offset by the subsequent positive 

effects because not all forgone economic activity will be recovered. CBO estimates that 

the shutdown reduced GDP in the fourth quarter of 2018 by $3 billion (in 2019 dollars); 

that the shutdown, together with the subsequent rebound in spending beginning in 

February, will, on net, reduce GDP in the first quarter of 2019 by $8 billion; and that in

the remainder of 2019, GDP will be boosted by $8 billion.10 Those estimates suggest that 

 

10 In order to see the relationship between those reductions in dollar terms and the effects on the level of 

quarterly GDP shown in Table 2, the reductions need to be annualized, or multiplied by four, because 

quarterly GDP is reported at an annual rate. For example, CBO estimates that the level of real GDP in the 

fourth quarter of 2018 (in 2019 dollars) was $5,290 billion at a quarterly rate and $21,160 billion at an 

annual rate. As a result, the reduction in real GDP in that quarter was 0.1 percent, which equals ($3 billion 

× 4)/$21,160 billion. 
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Table 2.

Estimated Economic Effects of the Partial Shutdown Lasting From December 22, 2018, to 

January 25, 2019

Fourth 

Quarter 

2018

First 

Quarter 

2019

Second 

Quarter 

2019

Third 

Quarter 

2019

Fourth 

Quarter 

2019

Effect on the Level of Real GDP 

(Percent) −0.1 −0.2 0.1 0.1 *

Effect on the Annualized 

Quarterly Growth Rate of Real 

GDP (Percentage points) −0.2 −0.4 1.0 ** −0.3

Real values are nominal values that have been adjusted to remove the effects of changes in prices.

GDP = gross domestic product; * = between zero and 0.05 percent; ** = between 

−0.05 percentage points and zero.

about $3 billion in forgone economic activity will not be recovered. That amount equals 

0.02 percent of projected annual GDP in 2019.

CBO estimates that the partial shutdown reduced the annualized quarterly growth rate of 

real GDP for the fourth quarter of 2018 by 0.2 percentage points. CBO also estimates that 

the shutdown will lower that annualized growth rate in the first quarter of 2019 by 

0.4 percentage points.11 In the second quarter of 2019, as federal spending continues to 

rebound following the resumption of funding in late January, real GDP growth will be 

boosted by 1.0 percentage point. 

Note that the effects on the annualized quarterly growth rates of real GDP are 

approximately four times the size of the change in the effect on the level of real GDP 

from quarter to quarter. For example, the negative effect on the level of GDP in the fourth 

quarter of 2018 rounds to 0.1 percent but is close to 0.05 percent, and four times that 

amount is a reduction in the annualized quarterly growth rate of 0.2 percentage points. 

For the first quarter of 2019, the change in the effect on the level of real GDP is about 

−0.1 percentage point (that is, the difference between the −0.2 percent effect in that 

quarter and the −0.1 percent effect in the fourth quarter of 2018). Four times that amount 

equals −0.4 percentage points, which is the effect on the annualized quarterly growth rate. 

The effect of the five-week shutdown on the level of GDP in the third quarter is expected 

to be similar to the effect on the level in the second quarter, so the effect on growth in the 

third quarter is very small. By the fourth quarter of 2019, CBO estimates, GDP will have 

nearly returned to the path that it would have taken in the absence of the shutdown. 

Because the level of GDP will be boosted by less in the fourth quarter than in the third 

quarter, the effect on the growth rate in the fourth quarter is negative.

 

11 In the economic projections that CBO released in The Budget and Economic Outlook: 2019 to 2029, 

which do not include the effects of the shutdown, the annualized growth rate of real GDP in the first quarter 

of 2019 is projected to be 2.5 percent. Incorporating the effect of the partial shutdown would, by itself, 

lower that projected rate to 2.1 percent.
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Federal Employees’ Hours and Compensation. The national income and product 

accounts (NIPAs), which are maintained by the Bureau of Economic Analysis, include 

comprehensive measures of economic activity, such as GDP and its components. One of 

those components reflects federal employees’ contribution to GDP. In the NIPAs, the 

Bureau of Economic Analysis is expected to reduce federal employees’ contribution to 

real GDP to be consistent with the reduction in the hours worked during the shutdown. 

As a result, furloughed employees will not have contributed to real GDP, despite 

receiving delayed compensation. In keeping with that approach, CBO estimates that 

excepted federal employees will have contributed directly to real GDP during the periods 

when they worked. Because of the reduction in hours worked by furloughed federal 

employees, the partial shutdown lowered real GDP in the first quarter of 2019 as well as 

in the fourth quarter of 2018. 

With the resumption of funding, the number of hours worked by federal employees and 

their estimated contribution to real GDP are expected to return to the paths that they 

would have followed in the absence of the shutdown. Although furloughed employees 

may try to make up for forgone activity once they resume work, the contribution of 

federal salaried workers to real GDP will probably be measured as a function of their 

regular hours—as it is usually measured in the NIPAs. In other words, the NIPAs 

probably will not record any increase in output. As a result, the forgone government 

services and the lost contribution to real GDP will never be recovered in measured GDP. 

As this report mentions above, CBO estimates that the value of services lost during the 

five-week partial shutdown is $3 billion in 2019 dollars (see Table 1 on page 5). 

Delayed federal compensation affects nominal GDP differently. The NIPAs measure the 

nominal output of federal workers as equaling their nominal compensation, whether those 

employees worked or were furloughed. Because CBO anticipates that the NIPAs will 

record federal back pay in the periods when federal workers would have been paid in the 

absence of the shutdown, delaying federal compensation has no direct effect on measured 

nominal output. 

Spending on Goods and Services. The delayed federal spending on goods and services 

will also affect real GDP. CBO estimates that the five-week partial shutdown made such 

spending $9 billion lower than it would have been otherwise. However, CBO expects that 

one-third of that $9 billion total reduction in spending on goods and services will be 

made up during February and March. Nonetheless, GDP will be dampened in the first 

quarter of 2019, on net. In later quarters, GDP will be larger than it would have been 

otherwise, as agencies continue to make up for the reduction in spending on goods and 

services that occurred during the shutdown.

Effects on Aggregate Demand. CBO estimates that in the near term, the partial 

shutdown also reduced aggregate demand in the private sector for goods and services,

pushing down GDP. The delay in federal compensation lowered consumer spending by 

affected federal workers—especially, CBO estimates, by liquidity-constrained workers 

who missed paychecks. In addition, the delay in federal spending on goods and services 

led to a loss of private-sector income that further lowered demand for other output 

produced by the private sector. As a result of those effects on aggregate demand, CBO 

estimates that economic output was dampened and that it will now be boosted as workers 
THE EFFECTS OF THE PARTIAL SHUTDOWN ENDING IN JANUARY 2019 JANUARY 2019

9

receive back pay and federal agencies resume making purchases and providing services.

Ultimately, aggregate demand is expected to return to the levels that it would have 

reached in the absence of the shutdown, although perhaps later than the end of 2019.

Effects on the Labor Market

The five-week partial shutdown is expected to have had small temporary effects on the 

level of employment and the unemployment rate. Both of those variables are reported by 

the Bureau of Labor Statistics (BLS), but they come from different surveys using 

different definitions.12 Because furloughed workers will receive back pay, BLS counts

those workers as employed in one survey, which is used to determine payroll 

employment. However, in another survey, which is used to determine the unemployment 

rate, BLS counts the same workers as unemployed on temporary layoff, as long as those 

workers reported that they were furloughed federal employees and were otherwise not 

temporarily employed. 

If all furloughed workers in January were counted as unemployed on temporary layoff, 

the measured unemployment rate would be boosted in January by about 0.2 percentage 

points. (That rate averaged 3.8 percent in the fourth quarter of 2018 and did not include 

any effects of the shutdown.) Excepted employees who were working would have had no 

direct effect on measured employment or on the unemployment rate. Also, the temporary 

decrease in private-sector activity that resulted from the shutdown might have slowed

hiring and increased layoffs in the private sector. That effect might translate into a 

slightly higher unemployment rate and slightly lower employment in January. Those 

effects will wane quickly with the resumption in funding, in CBO’s assessment. 

Distributional Effects

In addition to having the aggregate effects just described, the partial shutdown 

redistributed resources from some people and businesses to others. That redistribution 

happened in many ways, and for some, the negative effects were substantial. Federal 

workers whose compensation was delayed are among the people who experienced the 

largest and most direct negative effects, although that compensation will be restored with 

the resumption of funding. In addition, private producers that had contracts with federal 

agencies that were affected by the partial shutdown—and probably their employees and 

suppliers—saw a reduction in income during the shutdown. So did private businesses 

providing goods and services to affected employees. And people who lost income and 

consequently borrowed money during the shutdown will see an increase in expenses as 

they pay interest on that debt. 

Many other businesses, by contrast, are expected to see a small temporary increase in 

demand as a result of the shutdown and the resumption of funding. (Some of those 

businesses might be the same ones that experienced reductions in income.) Such 

businesses include those that saw a pickup in demand for services provided to furloughed 

employees. In addition, the resumption of funding and the payment of delayed 

compensation is expected to temporarily boost aggregate demand. After federal 

 

12 For details on how the Bureau of Labor Statistics incorporates the effect of the shutdown in its data 

releases, see Bureau of Labor Statistics, “Does the Lapse of Appropriation for Some Federal Agencies 

Impact BLS Data or Release Dates?” (January 24, 2019), https://go.usa.gov/xEBRf.
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employees receive back pay, they may temporarily increase their spending on goods and 

services, though not on exactly the same goods and services that they would have bought 

in December and January. And federal agencies affected by the shutdown will try to work 

quickly to reorganize their budgets and spend their appropriated funding—again, not 

necessarily on the same goods and services that they would have purchased in December 

and January. 

Methods and Uncertainty

CBO’s method of estimating the economic effects of the five-week partial shutdown 

relied heavily on two parameters. First, CBO estimated that affected federal agencies 

would make up for one-third of the reduction in spending on goods and services in each 

of the first, second, and third quarters of 2019. That estimate is based on how agencies 

have tried to spend their full current-year appropriation in the past. Second, CBO used its 

standard estimate of how changes in government spending affect aggregate demand and 

thus economic output in the near term. Specifically, CBO used its estimate of the demand 

multiplier (which is defined as the change in dollars of output for each dollar of direct 

effect on demand): 1.2 over four quarters. That estimate is based on evidence about the 

effects of fiscal policy changes that have been implemented in the past and on the 

agency’s short-term macroeconomic model.13

CBO’s estimates of the economic effects of the five-week partial shutdown are subject to 

considerable uncertainty. In particular, CBO’s estimate of the effects of the shutdown on 

federal compensation is uncertain. CBO has estimated the effect on personnel 

compensation using information from the affected agencies’ contingency plans and the 

amount of compensation for each of those agencies, but the number of workers who were 

furloughed fluctuated over the shutdown. In addition, CBO did not incorporate any 

effects from agencies that compensated employees with funds from previous 

appropriations. Furthermore, some small agencies within larger departments—for 

example, U.S. Citizenship and Immigration Services—had authority to compensate 

personnel with mandatory rather than discretionary spending. Because the effect on 

compensation among affected agencies is uncertain, CBO did not try to incorporate it.

In addition, CBO is uncertain about how various federal agencies adjusted their 

noncompensation spending during the shutdown, how much that spending will change 

with the resumption in funding, and how much the furloughed federal employees 

adjusted their spending and saving in response to delayed compensation. Moreover, a 

good deal of uncertainty exists about the magnitude and timing of the effects of changes 

in federal spending on aggregate demand. Because of those and other sources of 

 

13 In CBO’s assessment, the effects of government spending on aggregate demand, as summarized by the 

demand multiplier, vary with the state of the economy. For a detailed discussion of CBO’s approach to 

estimating the short-term effects of fiscal policy changes, see Congressional Budget Office, How CBO 

Analyzes the Effects of Changes in Federal Fiscal Policies on the Economy (November 2014), 

www.cbo.gov/publication/49494, and Felix Reichling and Charles Whalen, Assessing the Short-Term 

Effects on Output of Changes in Federal Fiscal Policies, Working Paper 2012-08 (Congressional Budget 

Office, May 2012), www.cbo.gov/publication/43278. Also see Marc Labonte, The FY2014 Government 

Shutdown: Economic Effects, Report for Congress R43292 (Congressional Research Service, 

September 2015).
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11

uncertainty, the actual economic effects of the partial shutdown may differ from CBO’s 

estimates. 

Other organizations have also estimated the economic effects of certain aspects of the 

shutdown, particularly the reduced contribution to real GDP from services provided by 

federal employees. CBO’s estimate of that particular effect appears to be similar to those 

organizations’ estimates. However, CBO’s overall estimate includes other types of effects 

that appear not to be included in others’ estimates, such as effects on aggregate demand 

for private-sector goods and services.

14 Probably because of that difference, CBO’s total 

estimate is higher than most estimates by other organizations. 

Other Possible Effects of the Partial Shutdown

CBO’s estimated effects of the five-week partial shutdown do not incorporate a number 

of indirect negative effects, which are more difficult to quantify but were probably

becoming more important as the shutdown continued. For example, during the shutdown, 

some businesses could not obtain federal permits and certifications, and some faced 

interrupted access to federal subsidies and loans provided by the federal government. 

Those types of disruptions were probably beginning to reduce economic output.

In addition, the absence of funding for agencies that help minimize various risks probably 

increased the risk of low-probability but high-cost events. Also, federal statistical 

agencies’ inability to publish economic data increased uncertainty about the economy 

among investors, households, and policymakers. Such factors were probably beginning to 

reduce investors’ confidence and to affect firms’ plans to invest and hire. Finally, funding 

lapses were probably beginning to reduce the credibility of the federal government as an 

employer and a contracting party, making it more difficult for federal agencies to attract 

and maintain a talented workforce and more expensive to enter into contracts with 

private firms. 

Although their precise effects on economic output are uncertain, those factors would have 

had increasingly negative effects if the partial shutdown had extended beyond five weeks.

And other disruptions would have probably emerged. For example, a longer shutdown 

could broadly dampen consumer spending by significantly disrupting federal benefit 

programs, such as the Supplemental Nutrition Assistance Program, housing programs, 

and other income support programs and by reducing consumer confidence. Although 

CBO did not observe a significant drop-off in grants, subsidies, or other payments made 

to individuals during the five-week shutdown, a longer shutdown would probably have 

disrupted those payments. 

 

14 For example, Macroeconomic Advisers by IHS Markit and Moody’s Analytics have both estimated that 

the forgone value of services not produced by furloughed federal workers in January would result in a 

reduction of annualized growth of real GDP of roughly one-quarter of a percentage point in the first quarter 

of 2019. 
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12

This Congressional Budget Office report was prepared at the request of Chairman John Yarmuth of the House 

Budget Committee and Congressman Tom O’Halleran. In keeping with CBO’s mandate to provide objective, 

impartial analysis, the report makes no recommendations.

The report was written by Wendy Edelberg, with contributions from Kathleen Burke, Kim Cawley, Devrim 

Demirel, Jacob Fabian, Theresa Gullo, John Kitchen, Mark Lasky, Junghoon Lee, John McClelland, T.J. McGrath, 

Sam Papenfuss, Dan Ready, Jeff Schafer, John Seliski, Jeffrey Werling, and Adam Wilson. Sebastien Gay, Joseph 

Kile, Deborah Kilroe, Leo Lex, and Chad Shirley provided useful comments. 

The report was reviewed by Mark Hadley, Jeffrey Kling, and Robert Sunshine. Benjamin Plotinsky and John Skeen 

edited the report and prepared it for publication. An electronic version is available on CBO’s website 

(www.cbo.gov/publication/54937).

The agency continually seeks feedback to make its work as useful as possible. Please send any feedback to 

communications@cbo.gov.

Keith Hall

Director

.