The record-long U.S. government shutdown, that is now in week five, could soon end up costing the economy more than the $5.7 billion that U.S. President Donald Trump is demanding for his border wall, according to one report.
The partial government shutdown started on Dec. 22, and if it continues to Friday, then S&P Global Ratings (a financial rating agency) predicts it will cost the economy $6 billion.
“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,” Beth Ann Bovino, S&P’s chief U.S. economist, said in an earlier report.
“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 paycheques.”
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Bovino added that the longer the shutdown drags on, the more “collateral damage” the economy will suffer.
The firm came up with the numbers by looking at the direct and indirect costs to the shutdown, such as loss of productivity and cancelled vacations to national parks and museums.
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Another blow to the economy is the contractors that do business with the government, the report said. Many government contractors are not getting paid and neither are their workers, meaning less money in their pockets to spend.
Consumer spending could also take a hit.
There are around 800,000 federal workers who have been furloughed or are working without pay since the shutdown started.
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Chicago Federal Reserve president Charles Evans said while the immediate effects of the shutdown on the US$20.7-trillion economy would be small, the indirect, psychological impact could be substantial, according to Reuters.
“Consumers get risk-averse and start hunkering down, businesses start planning to do less, and you start magnifying these effects,” Evans said.
Other financial experts have also sounded the alarm about the shutdown’s damage to the economy.
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On Jan. 15, JPMorgan CEO Jamie Dimon said the partial shutdown could wipe out the economy’s growth, according to CNBC, citing research that found the U.S .GDP growth could plummet to zero if the shutdown continued.
Pantheon Macroeconomics chief economist Ian Shepherdson wrote in a statement on Jan. 14, that if the shutdown were to last until March, there will be an “outright” decline in the first quarter GDP.
“Some of the ground lost would be recovered, because government employees working without pay likely will be compensated for their time once the shutdown is over, and Congress could enact legislation so that furloughed workers will be paid for the work they would have done if the shutdown hadn’t happened,” he stated.
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“But firms and farms which go bust as a result of the shutdown can’t be magically resurrected when it’s over.
The S&P Global Ratings report added that based on estimates adjusted for inflation, the three earlier government shutdowns (in 1995, 1996, and 2013) cost the federal government well into the billions of dollars.
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The White House has previously denied the shutdown could put a dent in the U.S. economy.