Prolonged Shutdown Could Push US Economy Over The Edge

2025-10-03 06:09:55

(MENAFN- Asia Times) The economic consequences of the current federal government shutdown hinge critically on how long it lasts. If it is resolved quickly, the costs will be small, but if it drags on, it could send the U.S. economy into a tailspin.

That's because the economy is already in a precarious state, with the labor market struggling, consumers losing confidence and uncertainty mounting.

As an economist who studies public finance , I closely follow how government policies affect the economy. Let me explain how a prolonged shutdown could affect the economy – and why it could be a tipping point to recession.

Direct shutdown impacts

The partial government shutdown began on October 1, 2025 , as Democrats and Republicans failed to reach a deal on funding some portion of the federal government. A partial shutdown means that some funding bills have been approved, entitlement spending continues since it does not rely on annual appropriations, and some workers are deemed necessary and stay on the job unpaid.

While most of the 20 shutdowns that occurred from 1976 through 2024 lasted only a few days to a week, there are signs the current one may not be resolved so quickly . The economy would definitely take a direct hit to gross domestic product from a lengthy shutdown, but it's the indirect impacts that could be more harmful.

The most recent shutdown, which extended over the 2018-2019 winter holidays and lasted 35 days, was the longest in US history. After it ended, the Congressional Budget Office estimated the partial shutdown delayed approximately US$18 billion in federal discretionary spending, which translated into an $11 billion reduction in real GDP.

Most of that lost output was made up later once the shutdown ended, the CBO noted. It estimated that the permanent losses were about $3 billion – a drop in the bucket for the $30 trillion US economy .

Many parks, such as Florida's Everglades National Park, were closed as a result of the shutdown. AP Photo/Rebecca Blackwell

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