Tuesday, January 29, 2019
Associated Press
WASHINGTON
The federal government shutdown will cause slight permanent harm to the economy – about $3 billion – according to a report Monday by the Congressional Budget Office.
The report says the five-week shutdown has slowed growth in the near term but that most of the lost growth “will eventually be recovered.”
Overall, CBO predicts that just $3 billion in lost gross domestic product will be permanently lost, a modest figure in a $20 trillion-plus economy. By year’s end, CBO says, GDP would be just 0.02 smaller because of the shutdown, which shuttered many domestic agencies. Most of the 800,000 furloughed federal workers returned to their jobs Monday.
More broadly, the report estimates a drop in GDP growth to 2.3 percent this year as the effects of President Donald Trump’s tax cut on business investment begin to drop off. It also says that the U.S. budget deficit will hit $897 billion this year.
The CBO credits the 2017 tax bill – which cut corporate and individual income taxes by $1.9 trillion over a decade – with a burst in growth last year, but it says that this year “the boost that recent tax legislation gave to business wanes.”
The report comes as the government is reopening after a 35-day partial shutdown. The CBO says the shutdown will have a modest negative impact on the economy, lowering projections of economic growth by 0.4 percentage points to 2.1 percent in the first quarter, though the economy is expected to mostly make up for it over the rest of the year.
The CBO Report predicts a $118 billion increase over last year’s $779 billion deficit. It predicts that the economy will grow by 2.3 percent this year, a slowdown from 3.1 percent last year.