Financial ratings agency Standard & Poor's reported this week the 16-day U.S. government shutdown costs delivered a massive $24 billion hit to the U.S. economy.
Standard & Poor's said the shutdown equaled some $1.5 billion a day and "shaved at least 0.6% off annualized fourth quarter 2013 GDP growth." Moody's Analytics reported similar numbers, saying the shutdown cost $1.4375 billion per day, for a $23 billion wallop to U.S. gross domestic product.
"The bottom line is the government shutdown has hurt the U.S. economy," Standard & Poor's said in a statement. "In September, we expected 3% annualized growth in the fourth quarter because we thought politicians would have learned from 2011 and taken steps to avoid things like a government shutdown and the possibility of a sovereign default. Since our forecast didn't hold, we now have to lower our fourth-quarter growth estimate to closer to 2%."
How the Full Government Shutdown Cost Was Tabulated
The tab from the government shutdown includes lost wages, lost productivity, and the ripple effects that followed. Here's how the direct and indirect costs added up, according to a report released late last week from the Office of Management and Budget (OMB):
- The shutdown cost national parks and museums $500 million in admission fees and concession stand sales. But the financial impact went much further. Some 700,00 people visit parks every day in a typical October, and communities surrounding the nation' s 401 national parks see about $76 million a day in total visitor spending that is lost during a government shutdown, according to the National Park Service.
- According to the U.S. Travel Association, $152 million per day, or $2.4 billion, in spending related to travel was forfeited over the 16-day shutdown. In Washington, D.C., alone, there was a 9% decrease in hotel occupancy during the first week of the October shutdown, according to the official tourism corporation of D.C, Destination D.C.
- Government permit offices across the country stopped collecting fees, government contractors stopped receiving checks, and critical research projects ceased. Several military contractors remain in limbo as uncertainty lingers about big projects.
- Most furloughed workers, in effect, got a paid vacation. Most received back pay for time lost during the standstill. In addition, many will likely pocket overtime pay as some agencies rush work that didn't get done over the two-week closure.
- Absent staff workers from the National Oceanic and Atmospheric Administration weren't on the job to issue permits to Alaskan king crab fisherman. The result was the short yet lucrative season (dubbed the Super Bowl of crab fishing) was delayed by four days. The delay cost fisherman thousands of dollars in lost revenue.
- Approximately 1,400 workplace safety inspections were suspended and won't be made up in full. The Grain Inspection, Packers and Stockyards Administration said "inability to investigate alleged violations could hamper corrective action in the long term and could have an immediate impact on members of the industry."
Overall, "The shutdown jeopardized both the income stability of Federal employees and their ability to focus on important agency missions that citizens rely upon each day," according to the OMB report. The deadlock "risks seriously damaging the ability to attract and retain the kind of driven, patriotic Americans to public service that our citizens deserve and that our system of self-government demands."
Government Shutdown a Hit to America's Reputation
But the full cost of the government shutdown was much greater. It caused irreparable damage at a number of government agencies and again called into question America's ability to control its finances.
Basically, the United States lost some of its swagger thanks to D.C. drama.
The government was closed because our country's leaders couldn't fulfill one of their most central responsibilities: enacting a budget.
Washington lawmakers chose politics over people as they wrangled over a deal. And, the world took notice. China and Japan, the two biggest foreign creditors of the U.S., sternly warned Congress to get its fiscal house in order. (Just look at China's call for a "de-Americanized world"...)
In a move that signaled discontent with Washington's budget deal and ballooning balance sheet, China rating agency Dagong downgraded America's sovereign debt rating one notch to A minus.
"The fundamental situation that the debt growth rate significantly outpaces that of the fiscal income and gross domestic product remains unchanged," Dagong said on its website.
"For a long time the U.S. government maintained its solvency by repaying its old debts through raising new debts, which constantly aggravated the vulnerabilities of the federal government's solvency. Hence, the government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future," Dagong continued.
The hastily agreed upon deal only funds the government through Jan. 15, and lifted the debt ceiling only through Feb. 7.
After that, Congress and the president will be back trying to negotiate a compromise. We all know how well that goes. Another stalemate would likely put a significant dent in business, consumer, and global confidence.
"If people are afraid that the government policy brinkmanship will resurface again, and with the risk of another shutdown or worse, they'll remain afraid to open up their checkbooks," Standard & Poor's said in a statement. "That points to another Humbug holiday season."
And a rough start to 2014...
Did you know the government shutdown forced President Obama to cancel his trip to a key meeting with the Association of Southeast Asian Nations leaders? This missed appearance was crucial because it created an "open season" for China's leaders at the summit... and that couldn't come at a worse time for the world...here's why.
FOX Business News:
Did the Government Shutdown Hurt Job, Economic Growth?
The Washington Post:
How Much Did the Shutdown Cost the Economy?