The recent partial US government shutdown cost the American economy twice as much as the money President Donald Trump had requested to build a wall on the border with Mexico, the Congressional Budget Office has revealed.
The 35-day impasse, which began on December 22 after congressional Democrats refused to give Trump $5.7 billion for the barrier, set back the economy by $11 billion, the CBO said in a report on Monday.
The shutdown’s impact on economic activity amounted to $3 billion, or 0.1 percent of gross domestic product (GDP), during the fourth quarter of 2018 and was projected to go all the way up to $8 billion, or 0.2 percent, in the first quarter of 2019.
Trump was forced to reopen the government on Friday by accepting a temporary spending bill that would keep federal agencies open for three weeks, giving enough time to Republican and Democratic leaders to try and reach a deal on the US-Mexico border wall.
The CBO said while the economy was expected to recover most of the cost in the coming months, the shutdown had already caused irreversible damage to some businesses and around 800,000 federal workers who had to either work unpaid or stay furloughed for over a month.
US President Donald Trump will emerge from the longest government shutdown in US history politically weakened.
“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,” the report said. “Some of those private-sector entities will never recoup that lost income.”
The CBO expected around $8 billion of the damage to be recuperated as employees went back to work but said the remaining $3 billion would never come back.
The report was requested by Democratic Representatives John Yarmuth, chairman of the budget committee, and Tom O’Halleran, co-chairman of the moderate Blue Dog Coalition.
US economy to slow down in 2019
The CBO’s annual report also predicted slower annual economic growth for the country in the wake of the Trump administration’s trade policies against China and other countries.
Overall, the CBO projected that economic growth will cap out at 2.3 percent in 2019, down from 3.1 percent last year.
The CBO said the slowdown was inevitable as a boost from federal spending and Trump’s 2017 tax cuts fades away.
The growth was expected to drop even more in the next years, averaging around 1.7 percent through 2023, which is below the congressional body’s estimate of the US economy’s potential.
In terms of deficit, the CBO said budget deficit was going to stand around $900 billion in 2019, or 4.2 percent of GDP. The figure was expected to grow to an average $1.2 trillion, or about 4.4 percent of GDP, each year between 2020 and 2029.
This is while the deficit had always hovered around 2.9 percent of GDP over the past 50 years, the CBO said.