The current government shutdown is not only the longest in U.S. history — it also appears to be the most economically harmful.
Normally, shutdowns cause brief disruptions that are quickly reversed once funding is restored. But the ongoing lapse in government funding, now in its 36th day since beginning on October 1, is already inflicting significant — though temporary — damage on the U.S. economy.
Millions of people are not receiving food stamp benefits they depend on. Roughly 1.4 million federal employees have missed paychecks, despite many continuing to work without pay. At the same time, the release of key government data has stopped, leaving policymakers and financial markets operating without up-to-date economic information.
Alec Phillips, chief political economist at Goldman Sachs, wrote in a recent note that “The current shutdown looks likely to have the greatest economic impact of any shutdown on record.”
Goldman Sachs estimates that even if the shutdown were to end next week, it would still reduce fourth-quarter real GDP growth by 1.15 percentage points. The Congressional Budget Office projects GDP could shrink by one to two percentage points, warning that “Those effects will intensify the longer the shutdown lasts.” Although most lost output will be recovered later, the CBO estimates that between $7 billion and $14 billion in economic activity will be permanently wiped out.
Goldman Sachs now expects fourth-quarter GDP to grow only 1%, a steep drop from the 3% to 4% growth projected for the previous quarter. Phillips wrote that this shutdown will cause “a much greater hit to growth than any prior shutdown” because it has lasted longer than any other and has halted the entire government’s funding. In contrast, the 2018–2019 shutdown — previously the longest — was only partial and affected about 10% of federal spending. The current shutdown has stopped 100% of appropriations.
David Kelly, chief global strategist at JPMorgan Asset Management, said the timing makes the situation worse because “The economy was already going to slow down, and this just made it worse.” He pointed to high tariffs, reduced immigration, and the resumption of student loan payments as additional drags on economic activity.
Kelly added that it is “shocking” to witness “how much public pain (Democrats and Republicans) are willing to inflict just to get a political gain.”