A government shutdown does not mean less spending in the long term. The spending that would have happened if the government were operating normally will still happen, but the spending delay, temporary rise in unemployment, delayed paychecks, and temporary lapses in feeding programs will have lasting effects even when the government reopens.
According to the Congressional Budget Office, delayed spending has already reached $33 billion after four weeks of a government shutdown. This includes delayed spending on goods and services as well as delayed compensation. While this funding should all be fulfilled at the end of the shutdown, 1.5 million furloughed and non-furloughed employees going without pay will have an effect on the economy at large. Some people will take out loans, reduce spending, and do whatever it takes to survive without pay for a time. This reduction in spending will affect the gross domestic product (GDP) and overall production long after the delay is over.
Estimates from the Congressional Budget Office (CBO) find that a four-week shutdown will lead to $18 billion in lost GDP in Q4 of 2025. While the country may be able to recover some of that lost growth, the lasting cost will be between $7 and $14 billion in lost GDP, depending on the length of the shutdown.
GDP is not the only long-term cost of the shutdown. Due to employee furloughs, CBO estimates that the unemployment rate will rise 0.4 percentage points in the month of the shutdown. Employment data largely affects how people perceive the economy and how the Federal Reserve Board makes economy-wide decisions, such as setting the interest rate. High unemployment translates to lower aggregate demand, which could lead to lower production. Some of these effects will end when Congress begins funding agencies again, but the signals in the economy still take effect over time.
One last cost of the shutdown is the lapse in funding for SNAP benefits. SNAP benefits will be fully paid through October, but the federal government will not be issuing benefits on November 1. Some states have the means to pay benefits from their budgets, but not all states are able to do so. This will likely put a strain on food banks, churches, and other charities. In November, there is typically an increase in food bank visits as those in need seek out assistance closer to the Thanksgiving holiday. This year, more people than usual are searching for alternative grocery assistance.
SNAP benefits lapsing could also affect grocery stores. Staffing at grocery stores is planned around cycle benefits, so a lapse in benefits could lead to further temporary unemployment or under-employment for retail and grocery employees. These chain effects will take time to reverse once the government reopens.
Bottom Line
The government shutdown will have lasting effects of $7 to $14 billion in lost GDP. These losses will trigger an economic chain reaction; consumers save where they can, and employers reduce their spending as well.