Fact-check: Past government shutdowns cost the U.S. economy billions

As Congress headed toward a potential pre-Christmas shutdown, some lawmakers warned that closing the government would not save taxpayer money.

Rep. Sara Jacobs, D-Calif., criticized a push for mass cuts in federal spending by the Department of Government Efficiency, an incoming presidential advisory committee run by entrepreneurs Elon Musk and Vivek Ramaswamy. Musk urged lawmakers to vote against a 1,500-plus page "continuing resolution" that would keep the government open. House Speaker Mike Johnson, R-La., had negotiated the plan with House Democrats, whose votes he needed to pass it.

Ramaswamy described the bill as "full of excessive spending" and said it "should fail." President-elect Donald Trump and JD Vance, the vice president-elect, rejected the spending deal that would fund the government through mid-March.

"Maybe someone should tell DOGE that government shutdowns aren’t efficient or cost effective?" Jacobs wrote Dec. 18 on X, using the committee’s self-chosen abbreviation. "The 2013 and 2018 ones (again led by House Republicans) cost our economy billions of dollars each."

In a video, Jacobs added that a government shutdown wouldn’t hurt Musk and Trump, both billionaires, as it would "everyday Americans."

Government analyses and outside experts say Jacobs has a point that shutdowns can cost the economy, often measured in gross domestic product, billions of dollars. (Gross domestic product is the total monetary value of all goods and services a country produces.)

"Typically there is a shifting of activity across time and an overall loss of GDP in the single digit billions," said Douglas Holtz-Eakin, president of the American Action Forum, a center-right think tank. He cautioned, however, that even a shutdown that costs billions of dollars is modest in the context of a $27 trillion-plus U.S. economy. 

Congress has until late Dec. 20 to pass a bill that President Joe Biden would sign before 12:01 a.m. Dec. 21 to avoid a shutdown.

Workers across the country would feel a shutdown’s effects. About 85% of federal workers are based outside the Washington, D.C., metropolitan area.

Shutdowns vary in scope and length, and calculating the cost of any particular shutdown is complicated. But government and private analysts have previously estimated that shutdowns hurt the economy.

"Government shutdowns decrease government spending, so these goods and services cannot be provided, directly decreasing output," the Congressional Research Service wrote in 2023. 

Shutdowns primarily affect discretionary spending, which accounts for about 27% of total federal spending. Shutdowns do not generally affect mandatory spending, such as Social Security, Medicare and interest payments on the national debt.

Shutdowns also have indirect economic effects, notably federal workers reducing their own spending because they aren’t receiving their paychecks. Although federal workers are paid retroactively, a cash crunch at Christmastime could dampen retail sales and complicate travel.

Steve Ellis, president of Taxpayers for Common Sense, a nonpartisan group that tracks the federal budget, told PolitiFact, "Everyone agrees that shutdowns hurt the economy and taxpayers."

He cautioned, however, that a hit in one quarter can be partially made up in a later quarter. 

"The federal government is going to spend that money, the work is going to get done," Ellis said. But he added that "it won’t be as efficient, so shutdowns are always a waste of money and time."

A Jacobs spokesperson pointed to several data points, including a Congressional Budget Office estimate that the five-week partial government shutdown in 2018-19 reduced economic output by $11 billion during the following two quarters, including $3 billion that the U.S. economy never regained.

Jacobs’ office also cited a government report that said the cost of pay for furloughed workers was $2 billion. Moody’s Analytics said the 16-day full-government shutdown in October 2013 reduced U.S. GDP growth by $20 billion. 

Another examination of the 2013 shutdown, by the White House’s Office of Management and Budget, found:

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Rep. Marjorie Taylor Greene said “if every member of Congress had to resign for doing what Matt Gaetz has been accused of, Democrats would have a supermajority.’"

• 120,000 fewer private-sector jobs created in October’s first half.

• $500 million lost in visitor spending because of closed national parks.

• Interest accrued on billions of dollars of payments owed to third parties that the government couldn’t pay during the shutdown.

• Resources spent on putting activities in standby or maintaining them in an idle mode.

• 1.2 million Internal Revenue Service identity verification requests that couldn’t be processed, delaying private-sector lending and other activities.

• Stalled approvals from the U.S. Food and Drug Administration that delayed sending products to market.

In 2013, Moody’s Analytics chief economist Mark Zandi said the shutdown stunted fourth-quarter GDP growth by 0.5 percentage points, resulting in a $20 billion hit to the economy. Standard & Poor's found a similar lost amount.

When Sen. Rand Paul, R-Ky., said in 2014, "It cost us more to shut the government down than to keep it open," we rated his statement True. With Republicans poised to control Congress, Paul has a different take, expressing support for Musk and criticizing Johnson. 

Jacobs said government shutdowns in 2013 and 2018 "cost our economy billions of dollars each."

Independent estimates by government offices and private-sector economic analysts concluded that the 2013 full-government shutdown and the 2018-19 partial shutdown cost the U.S. multiple billions of dollars.

We rate this statement True. 

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