Shutdowns don't usually have a lasting economic impact. Is this one different? Rachel Barber, USA TODAYOctober 22, 2025 at 4:06 AM 0 Even when discussions in Congress grind to a halt, much of the government's economic machinery keeps running.
- - Shutdowns don't usually have a lasting economic impact. Is this one different?
Rachel Barber, USA TODAYOctober 22, 2025 at 4:06 AM
0
Even when discussions in Congress grind to a halt, much of the government's economic machinery keeps running.
Social Security benefits still go out, student loan payments are collected, and essential employees continue working, even if they're not getting paid. The Federal Reserve continues to operate, the U.S. Treasury Department still services debt, and ports as well as the U.S. Postal Service remain open.
Shutdowns historically have not had major lasting impacts on the economy. They've had little effect on markets and U.S. Treasury yields, according to a recent report from Truist Advisory Services. However, the risk of adverse effects grows the longer a shutdown drags on.
And some forecasters warn the current shutdown could do more damage than some previous instances, particularly given President Donald Trump's threats that some furloughed workers may not receive back pay or could be laid off. However, these suggested layoffs are currently being challenged in court.
"The reason why shutdowns have minimal impact is that all that spending comes back ... but if you're firing people, or you're not giving back pay, that amount of money is permanently lost," said Center on Budget and Policy Priorities Chief Economist Gbenga Ajilore. "There are a lot of things that just normally do not happen during shutdowns, that might happen this time around that's going to have a larger adverse impact."
Missed SNAP benefits and paychecks coming soon
So far, Americans have been able to rely on the Supplemental Nutrition Assistance Program to buy food, but the U.S. Department of Agriculture has warned there will not be enough funding to pay the entirety of November SNAP benefits if the shutdown continues.
Oct. 24 will mark the first full missed paycheck for many federal workers. Oxford Economics' Lead U.S. Economist Bernard Yaros estimates the shutdown threatens to disrupt $800 million worth of federal contracts each workday it continues.
"Some folks will be able to lean on savings or credit to sustain their consumption, but others are going to immediately fall into financial distress," Yaros said. "The biggest concern is the federal contract workforce, which is significantly larger than the civilian federal workforce."
More: Government shutdown hits 3 weeks as furloughs mount. Live updates
The U.S. Capitol building at dusk in Washington, D.C., U.S., October 20, 2025. REUTERS/Kylie CooperHow much money is lost during a government shutdown?
Before the shutdown, Oxford Economics warned a funding lapse could pose "some downside risk" to fourth-quarter real GDP, but that it would "need to be longer than normal to leave a mark on the economy."
More than three weeks into the shutdown, that risk might be materializing. On Day 13, House Speaker Mike Johnson said the United States is "barreling toward one of the longest shutdowns in American history." The longest shutdown lasted 35 days, from Dec. 22, 2018, to January 25, 2019.
After that historic partial shutdown, the Congressional Budget Office estimated that real GDP was 0.1% lower in the fourth quarter of 2018 and 0.2% lower in the first quarter of 2019, than it otherwise would have been. The CBO estimated the five-week lapse cost the economy $11 billion, of which $3 billion was viewed as permanently lost.
U.S. House Speaker Mike Johnson (R-LA) speaks with reporters following a press conference weeks into the continuing U.S. government shutdown, on Capitol Hill in Washington, D.C., U.S., October 21, 2025. REUTERS/Al DragoWho does a government shutdown impact most?
Federal workers and contractors bear the brunt of a shutdown's worst impacts through lost pay, work stoppages, and delayed contacts.
To mitigate those effects for specific workers, Trump announced his administration identified funds to pay members of the military. Department of Homeland Security officers, including Immigration and Customs Enforcement agents, will also be paid during the shutdown, according to Secretary Kristi Noem.
The Government Employee Fair Treatment Act, which Trump signed into law in 2019, guarantees back pay for federal employees once the government reopens. Elaine Kamarck, a senior fellow at the Brookings Institution, described Trump's threats as a "negotiating tactic" and said there would be "hell to pay" if federal workers do not receive back pay.
Federal contractors, however, are not guaranteed the same protection. They, too, will likely go to court if they can afford it, Kamarck said.
"The biggest hit is going to be small businesses who have government contracts, because they're not going to be able to afford all the court proceedings," Kamarck added. "The contractors are going to take a hit, and the people who work for the contractors will take a hit."
How does the shutdown affect local economies?
After months of layoffs and government efficiency cuts, local economies with large numbers of federal employees, such as those in Washington, D.C., Maryland, and Virginia, are likely to feel pinched as reduced foot traffic and consumer spending weigh on restaurants, shops, and service providers.
Tourism in D.C. has also slowed as many popular sites remain closed, potentially compounding losses for local businesses.
A sign, indicating the tours are not happening, is displayed inside the U.S. Capitol, weeks into the continuing U.S. government shutdown, in Washington, D.C., U.S., October 20, 2025. REUTERS/Al Drago
But federal workers aren't confined to the nation's capital. About 80% of them live outside the Washington D.C. area, according to the Partnership for Public Service.
For a shutdown to have a broader economic impact, economists say it would need to affect consumer confidence and spending – indicators they are closely watching.
Federal workers, already questioning whether they'll receive back pay, may also begin to wonder how safe their job is overall in light of mass government layoffs, Yaros said.
"If that's the case, you could see an even bigger pullback in consumer spending, especially in these federal hubs across the nation," Yaros added. "We will be monitoring the confidence data that we get because in the past, the public has been aware of brinkmanship in Capitol Hill and they've reacted negatively."
What funding is typically impacted during a shutdown?
The government shuts down when funding expires, and lawmakers fail to enact appropriations bills or a continuing resolution. Shutdowns primarily affect discretionary spending, which represents only a portion of the federal budget – about 27% in 2024, according to the Congressional Budget Office.
The rest is considered mandatory spending, which funds programs including Social Security, Medicare, and Medicaid. Generally, those programs continue to operate during a shutdown.
But other government economic functions slow due to a lapse in funding.
With the government out of money after President Donald Trump and lawmakers failed to agree on a deal to keep the lights on, many federal departments and agencies have been closed since midnight. See what remains open and what has closed.
" style=padding-bottom:56%>People wait in line to enter the Federal Building in Los Angeles, California on October 1, 2025, where services are experiencing significant disruptions due to the federal government shutdown, as essential workers continue working without pay and non-essential federal workers are furloughed. With the government out of money after President Donald Trump and lawmakers failed to agree on a deal to keep the lights on, many federal departments and agencies have been closed since midnight. See what remains open and what has closed.
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People wait in line to enter the Federal Building in Los Angeles, California on October 1, 2025, where services are experiencing significant disruptions due to the federal government shutdown, as essential workers continue working without pay and non-essential federal workers are furloughed. With the government out of money after President Donald Trump and lawmakers failed to agree on a deal to keep the lights on, many federal departments and agencies have been closed since midnight. See what remains open and what has closed.
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Members of the National Guard patrol along the grounds of the US Capitol on the first day of the US government shutdown in Washington, DC, on October 1, 2025. Essential services, like military and law enforcement, remain working.
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Members of the National Guard patrol along the grounds of the US Capitol on the first day of the US government shutdown in Washington, DC, on October 1, 2025. Essential services, like military and law enforcement, remain working.
">Members of the National Guard patrol along the grounds of the US Capitol on the first day of the US government shutdown in Washington, DC, on October 1, 2025. Essential services, like military and law enforcement, remain working.
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1 / 15See the impact of the government shutdown as agencies shutter or fight to stay open
People wait in line to enter the Federal Building in Los Angeles, California on October 1, 2025, where services are experiencing significant disruptions due to the federal government shutdown, as essential workers continue working without pay and non-essential federal workers are furloughed. With the government out of money after President Donald Trump and lawmakers failed to agree on a deal to keep the lights on, many federal departments and agencies have been closed since midnight. See what remains open and what has closed.
The Bureau of Labor Statistics' jobs report due out Oct. 3 was delayed, and the agency's CPI report was postponed until Oct. 24, which also pushed back the Social Security Administration's annual cost of living adjustment announcement.
Transportation Security Administration and air traffic controllers are going without pay, contributing to increased absenteeism and potential safety risks at a time when many Americans are preparing for holiday travel.
"There will come a point where a lot of workers, especially those in air traffic control or TSA agents, will stop showing up or call in sick and that's going to lead to all sorts of delays," Bernard said. "It's going to take some public outrage for both parties to realize we can't stand this going on any longer."
Lending operations at several government agencies are also impacted. While work continues, employee furloughs can lead to delays in processing loans and mortgage applications.
Ashton Reed, of Jackson, Missouri, is a first-time homebuyer who is navigating the U.S. Department of Agriculture loan process during the shutdown. He said he's reached out to his representatives in Congress and that they haven't responded to address his issue. He wants them to know he doesn't like being a "pawn," and that the shutdown's impact feels like "utter betrayal."
Reed is one of more than 140,000 people who have signed a Change.org petition demanding members of Congress not receive pay or benefits while the shutdown continues.
"Right now, I can't close on my house until the government reopens," Reed told USA TODAY. "This shutdown is affecting people who don't even work for the federal government. If we the people have to suffer through a shutdown, so should Congress."
Reach Rachel Barber at [email protected] and follow her on X @rachelbarber_
This article originally appeared on USA TODAY: Shutdowns rarely have big economic impacts. Is this one different?
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