US Park Police officer watches at left as a National Park Service employee posts a sign on a barricade closing access to the Lincoln Memorial in Washington, on Oct. 1, 2013
Carolyn Kaster // AP File

White House now expects the shutdown to hurt the economy even more

The most important aspect of the ongoing government shutdown – now the longest in American history – is the impact it’s having on people. Hundreds of thousands of federal workers and their families are shouldering a tremendous burden, and many are being forced to work without pay.

There’s also, of course, the effects the shutdown is having on all kinds of public-sector services, covering everything from food safety to air travel, environmental protections to the FBI.

And then there’s the economy.

“Someone – maybe Larry Kudlow? – has to explain to Trump that the longer the shutdown, the weaker the economy will appear as the next election cycle approaches,” Greg Valliere, chief global strategist at Horizon Investments, noted this morning.

How much weaker? CNBC reported this morning that the Trump administration now expects the shutdown to undermine the economy twice as much as it originally feared.

The original estimate that the partial shutdown would subtract 0.1 percentage point from growth every two weeks has now been doubled to a 0.1 percentage point subtraction every week, according to an official who asked not to be named.

The administration had initially counted just the impact from the 800,000 federal workers not receiving their paychecks. But they now believe the impact doubles, due to greater losses from private contractors also out of work and other government spending and functions that won’t occur.

I imagine for some, seeing a report about 0.1% changes probably doesn’t seem especially worrisome. But these modest reductions make a difference: if the shutdown lasts another two weeks, the White House expects it would reduce quarterly growth by a half a percentage point.

In other words, if the economy would otherwise grow at 2% – a decent number – the shutdown would push that number to 1.5% GDP growth.

The CNBC report quoted Ian Shepherdson, chief economist at Pantheon Macroeconomics, who believes if the shutdown continues through March, it could wipe out first quarter growth altogether.

We’re still waiting for the report on GDP in the fourth quarter of 2018, and we may be waiting for a while: the officials responsible for publishing the report work at the Commerce Department, which is one of the federal agencies affected by the shutdown.

Donald Trump is already feeling the heat on the mess he created. It’s only going to get worse.

GDP and Government Shutdowns

White House now expects the shutdown to hurt the economy even more