The Economic Impact of the 2025 Government Shutdown
What is the real cost of the 2025 government shutdown? We’re tracking the impact on U.S. GDP, the national debt, federal workers and the wider economy as the shutdown enters its 5th week.
Economic Impact at a Glance (Day 37)
As the shutdown stretches deeper into its fifth week, the economic toll is clear and large-scale.
Estimated $18 B – $28 B
The Congressional Budget Office (CBO) estimates that a shutdown of four to six weeks could reduce real GDP by $18 billion to $28 billion in the fourth quarter. :contentReference[oaicite:1]{index=1}
Growing Risk of Downgrade
Faulty funding and service disruptions raise alarm among rating agencies and investors: prolonged shutdowns undermine the U.S.’s fiscal credibility and increase borrowing costs. :contentReference[oaicite:2]{index=2}
Billions in Pause
Federal contracts and sub-grants are frozen. SMEs reliant on federal dollars are facing layoffs or shuttering until appropriations resume. :contentReference[oaicite:3]{index=3}
Official CBO & Economic Analysis
The CBO’s latest analysis provides the most robust non‐partisan estimates of the shutdown’s economic damage.
“A Quantitative Analysis of the Effects of a Government Shutdown”
The report estimates that while most lost output would be recovered, between ~$7 billion and ~$14 billion of output will be permanently lost if the shutdown lasts between four and eight weeks. :contentReference[oaicite:4]{index=4}
~$400 Million Per Day in Furloughed Pay
The CBO estimates roughly 750,000 federal workers could be furloughed each day of a shutdown, costing ~\$400 million per day in compensation. :contentReference[oaicite:5]{index=5}
-1.0 % to -2.0 % Q4 Real GDP
For a shutdown lasting six to eight weeks, the CBO calculates that real GDP growth in Q4 could be 1 to 2 percentage points lower than it otherwise would be. :contentReference[oaicite:6]{index=6}
Impact on Federal Workers & Contractors
Disruptions are not abstract—they hit households, towns and businesses tied to federal paychecks and contracts.
800,000+ Unpaid, Many With Delayed Pay
Federal workers (furloughed or excepted) have gone without regular pay. While back pay is legally guaranteed in many cases, the economic damage from missed bills and local spending is immediate.
Major Risk, No Guaranteed Back Pay
Contractors are often excluded from back-pay protections. They face direct income loss, layoffs and ripple effects in local service industries. :contentReference[oaicite:7]{index=7}
Impact by Sector (Science, Health, Business)
From research labs to food-safety inspections, the shutdown stalls services that underpin broader economic activity.
Billions in Federal Grants Paused
Programs like NIH and NSF are impacted, freezing new grants, halting research and affecting university and industry partners.
Routine Inspections & Certifications Stopped
Agencies such as the FDA and USDA have reduced routine inspections and regulatory review, increasing risk and delaying business operations.
Checkpoint Delays & Park Closures
Longer airport lines (TSA shortages) and the closure of major national parks are hurting tourism spending in gateway economies.
Impact on the National Economy
The shutdown’s effects aren’t just in Washington: they ripple into investment, credit costs and business confidence.
Warning Signs from Rating Agencies
Sustained shutdowns raise concerns about U.S. fiscal governance, increasing borrowing cost and raising the risk of a credit-rating downgrade.
Heightened Uncertainty, Risk-Off Mood
Delayed federal contracts, frozen loans and uncertainty about government operations are prompting delays in business decisions and lower investment spending.
Distinct But Connected Risks
A shutdown halts new spending; a debt‐ceiling crisis threatens payment of existing obligations. Both impair economic confidence—but a default would be far worse.
Impact on Local Economies
While national numbers grab headlines, local damage is often more immediately acute.
Local Spending Collapses
With hundreds of thousands of federal employees and contractors unpaid, spending in restaurants, retail and services around Washington, D.C., Virginia and Maryland has dropped sharply.
Major Park Towns Hit Hard
Towns around national-parks that rely on federal visitors are facing lost revenue as parks remain closed and tourism stalls.
Historical Cost of Shutdowns
Comparing this shutdown with past episodes shows the magnitude of what’s happening now.
~$11 Billion Lost GDP
The CBO estimated that the 2018-19 shutdown cost the economy $11 billion, with about $3 billion permanently lost. :contentReference[oaicite:8]{index=8}
Variable Costs, Permanent Losses
Even shorter shutdowns often leave lasting economic scars—lost productivity, delayed investment and disrupted supply chains. :contentReference[oaicite:9]{index=9}
What This Means For You
The economic stats are big, but the impact is very real for individuals and businesses. Here are steps you can take if you’re affected.
Find Financial & Food Assistance
Our resource guide has links to food banks, credit-union relief programs, and other support routes if your paycheck or contract is delayed.
Understand the Political Standoff
Read our explainer on what’s at stake in the funding fight—so you’re not caught off guard by changes in programs or benefits.