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Li writes: "If the government shutdown lasts another two weeks, the total cost to the U.S. economy would exceed the price of building the proposed border wall."

Migrants, part of a caravan of thousands from Central America trying to reach the United States, climb down a steep hill near the border wall into the U.S. from Tijuana, Mexico. (photo: Leah Millis/Reuters)
Migrants, part of a caravan of thousands from Central America trying to reach the United States, climb down a steep hill near the border wall into the U.S. from Tijuana, Mexico. (photo: Leah Millis/Reuters)


ALSO SEE: America Shuts Down: How the Federal Government
Closure Is Impacting Millions

If the Shutdown Lasts Two More Weeks, the Cost to the Economy Will Exceed Price of Trump's Wall

By Yun Li, CNBC

12 January 19

 

f the government shutdown lasts another two weeks, the total cost to the U.S. economy would exceed the price of building the proposed border wall.

According to an estimate by S&P Global Ratings, it will only take another two weeks to cost the economy more than $6 billion, exceeding the $5.7 billion that President Donald Trump demanded to fund his proposed border wall. The U.S. economy will have lost $3.6 billion by Friday, according to S&P.

“We estimated that this shutdown could shave approximately $1.2 billion off real GDP in the quarter for each week that part of the government is closed. That may seem like pennies for the world’s biggest economy, but it means a lot to those workers trying to cover their household costs without their paychecks,” Beth Ann Bovino, S&P’s chief U.S. economist, said in a note on Friday.

The firm came up with these figures by looking at costs related to the shutdown including lost productivity by furloughed workers and a decrease in sales for contractors to the government.

The partial government shutdown entered its 21st day Friday, tying the record for longest lapse in federal funding. Lawmakers have failed to fund about a quarter of the government, as President Donald Trump= demands money for his proposed border wall. Trump has threatened to veto legislation passed by the Democratic-controlled House to reopen the government temporarily, and that has deterred the GOP-controlled Senate from passing it.

Consumer spending

As the government shutdown nears a record-breaking run, retailers like Best Buy and Bed Bath & Beyond could start to feel the bite from lower consumer spending.

With 800,000 federal workers not being paid and a potential delay in tax refunds, the economic effect of the partial government shutdown could be at least $2 billion per week, according to Wells Fargo retail analysts.

The retailers that would be hurt the most include those that sell more discretionary goods such as Best Buy and Bed Bath & Beyond and those operating in regions with high government employment, including Ulta Beauty and Dick’s Sporting Goods, the bank predicted.

Retailers that sell household necessities may have more of a cushion now, but “if the shutdown were to eventually impact benefit programs like SNAP, players like dollar stores, Walmart and Kroger could feel pressure, ” Wells Fargo’s Zachary Fadem said in a note to clients Friday. “On the other hand, history illustrates that prior shutdowns had limited impact on retailers with staples-like characteristics, including grocers and auto part retailers.”

Wells Fargo is not alone on Wall Street seeing the damage from the shutdown hitting retailers. Jefferies took a closer look at the areas with the most workers affected by the shutdown — Washington, D.C., Maryland and Virginia. Companies including restaurant chain Chuy’s, and retailers The Container Store and Nordstrom, that have a higher percentage of locations in those areas will likely experience more damage, Jefferies said.

“Impact from the government shutdown could extend well beyond some restaurants in DuPont Circle, “Jefferies’ Laurence Alexander said in a note Tuesday, referencing a section of Washington, D.C.

Wall Street cutting GDP forecasts

The shutdown in 2013, which lasted 16 days, shaved 0.4 percent off GDP in the fourth quarter of 2013. Alexander pointed out that payments to government contractors are likely to be affected as well as home sales because of delays in federal loans.

J.P. Morgan economists have already cut their first-quarter growth forecast by a quarter point to 2 percent because of the shutdown. Bank of America Merrill Lynch economists shaved 0.1 percentage point from fourth-quarter growth, bringing that forecast to 2.8 percent, due to the shutdown.

If the shutdown gets resolved before the end of the quarter, some of the lost spending may be recovered once the workers get back pay, but GDP inputs like productivity are permanently gone.

“While government workers will likely recoup their lost wages once the government opens, as they have in the past, the many government contract workers who are out of work because of the shutdown are unlikely to get back pay,” said S&P Global. “Workers who are living paycheck to paycheck will struggle to make ends meet the longer this goes on. As the standoff drags on, no paychecks are arriving to refill their savings, pay down credit card debt, make that mortgage payment, or pay their rent.”

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-8 # Rodion Raskolnikov 2019-01-12 17:13
I live in the DC metro area and I can say that the traffic during this shutdown has been great. You can actually drive to places without standing in traffic and dealing with over-stressed people who want to vent their rage on the road.

The stores are empty, too. In a mall yesterday, a clerk said business was dead. She blamed the shutdown.

I think the side that chooses to make the concessions to re-open the government will win the propaganda war. This is a battle of hard heads between Trump and the democrats in congress. I'm with the congress. They have the power of the budget and they should not fund a stupid wall. If Trump were smart, he'd concede, re-open the government, and move on to more important things. But he's not smart. The wall has become a symbol.

Last year, when Trump offered to support giving DACA recipients a clear plath to citizenship in exchange for funding the Wall, I supported Trump's deal. Resolving the DACA problem would have been worth a 5 billion dollar waste of money on a wall. But democrats would not deal back then.

This sort of partisan entrenchment is only turning people against political parties and government. It is not working for the American people. The whole system needs to be changed. This wall symbolism is really about 2020 -- can democrats defeat Trump and force him to cry "uncle." I think they will all be losers.
 
 
+4 # mashiguo 2019-01-12 23:11
My guess is that Trump will keep up the shutdown until he turns blue.

That will be a very long time - orange is as far from blue on the color wheel as you can get.

Maybe it's time for the 25th amendment. I know everyone is just salivating to get Pence in there and really ruin the country.
 
 
+3 # littlebird 2019-01-13 00:30
I think that Mr. Trump should be forced to sit and watch old broadcasts of Franklin D. Roosevelt, who was a great president, who brought our country out of a depression and who was able to bring in "The New Deal". We need a new deal and it does not include walls, but new ways to use America's manpower in building roads, dams and bridges and new infrastructure for hurricane and storm proofing our electrical power. We need ways to provide help for states in disaster from forest fires or floods, and assistance to Porto Rico. Money for a wall means there is no money for the other needs that are more important.

Let the little bratty baby president hold his breath and pitch a fit while Congress waits, he will only embarrass himself while he lets the government workers go on welfare. How do you reason with someone who is so childlike and spoiled that he thinks he will get his way by threats and bullying? How do parents who have a child like that cope with them? I will tell you one way, they do not give him what he wants, which will only encourage more of the same behavior. Congress should stop negotiating. They need to begin proceedings for impeachment!
 
 
0 # Jaax88 2019-01-13 01:07
This situation is nuts. Full disclosure, I think Trump s a clown, incompetent and should not be president and I believe Trumps proposed Wall to be phony political con job and not necessary. But with thousands being hurt, the economy being compromised and worse to come if the shutdown keeps going on some people should come up with a workable a resolution plan sooner than later. I suggest a bipartisan panel of knowledgeable people, such as Congress people, local officials along the border, economists, former Border Patrol officers and selected others to determine what the real facts are around the immigrant situation on our Southern border and the economic costs are and will be to keep the government shut down. The present them to Trump as I believe they will show the damage to the country and that he is mistaken. And then try to talk him out of his insistence on a nonsensical Wall.
 
 
+3 # RLF 2019-01-13 09:41
The price of the wall is not 5.7 billion...that is just this year's part.
 
 
+4 # ahollman 2019-01-13 11:06
Yes, the economic cost of the shutdown will soon exceed the amount of border wall money in question. However, that is -not- a good reason for one side to give in to the other? I don't think so.

To summarize, consumer spending, which constitutes roughly of US GDP, will drop off first and fastest for discretionary goods and services, then more slowly for desirables, then minimally and least for necessities like food.

Once again, the costs will fall first and heaviest on those least able to afford them - not consumers, but the producers and sellers of these goods and services. Beyond a month, this will affect -everyone- who can't work, since just about everyone pays either rent or a mortgage.

Trump has redefined "national emergency" from "an immediate and severe threat to the entire country" to "whenever I don't get my way or Congress won't do what I want". If this was a true national emergency, he could have and should have already called it. That he's waiting to see what Congress will do means it isn't one.

I'm cynical enough to believe Trump sees this as a win-win: Even if he doesn't get his wall, he shrinks government spending and output.

A pet peeve, not only for RSN authors, but many others: Stop confusing productivity and output. The former is a ratio of some output to some input; the latter is strictly a measure of some output. When someone doesn't work, there is 0 output and 0 input. You can't measure the productivity of someone who isn't working.
 
 
0 # ddd-rrr 2019-01-14 10:51
.
Ain't Trump jes' wunnerful?!

An' ain't you's who voted fer him jes' real glad yuh did that?!
 

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