Trump claims ‘big win’ but what did America lose during its longest govt shutdown?

The House of Representatives appeared likely to vote Wednesday on a spending bill to end the six-week standoff, after eight Democrats broke ranks in the Senate on Monday to side with President Donald Trump’s Republicans. As US lawmakers reached an agreement on spending priorities, which Trump hailed as a “very big victory”, around 750,000 federal employees remained furloughed, millions of Americans faced lapses in food assistance, and air travel across the country was severely disrupted.

During a Veterans Day speech at Arlington National Cemetery, Trump broke off to praise Republican House Speaker Mike Johnson and Senate Majority Leader John Thune. “Congratulations to you and to John and to everybody on a very big victory,” Trump said as he spotted Johnson in the audience.

“We’re opening up our country; it should have never been closed,” he added, breaking with US presidential tradition by using a ceremonial event to mark a political win.

Since the shutdown began on October 1, more than a million federal employees have gone without pay, and government services and benefits have faced growing disruptions.

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White House economic adviser Kevin Hassett warned that US economic growth in the fourth quarter could turn negative if the federal shutdown persists. In an interview on CBS’s Face the Nation aired Sunday, Hassett noted that a shortage of air traffic controllers had already led to major travel disruptions ahead of the Thanksgiving holiday.

“Thanksgiving time is one of the hottest times of the year for the economy… and if people aren’t travelling at that moment, then we really could be looking at a negative quarter for the fourth quarter,” Hassett said.

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Record shutdown leaves deep economic scars

The record-breaking longest government shutdown has left Americans feeling worse about the economic outlook. According to the latest University of Michigan consumer sentiment survey, the index fell to 50.3 this month from 53.6 in October, the lowest since June 2022, which was also the weakest reading since the survey began in the 1950s.

“With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy,” said Joanne Hsu, director of surveys of consumers at the University of Michigan. The drop represents a 6.2% decline from October and a 29.9% fall compared to last November. Economists polled by FactSet had expected a slight improvement this month.

“The index certainly looks like the economy is ready to roll over the proverbial cliff,” said Chris Rupkey, chief economist at FwdBonds, in commentary issued Friday.

The 2019 shutdown: five weeks that cost America $3 billion

The US government, from December 2018 to January 2019, was shut down during President Donald Trump’s first term, following a standoff triggered by the Democrats’ refusal to fund his proposed southern border wall.

The Congressional Budget Office (CBO) estimated that the five-week partial shutdown delayed approximately $18 billion in federal discretionary spending on compensation and purchases of goods and services, suspending several federal services.

As a result of reduced economic activity, CBO estimated that real (inflation-adjusted) gross domestic product (GDP) in the fourth quarter of 2018 was reduced by $3 billion (in 2019 dollars) compared to what it would have been otherwise. In the first quarter of 2019, real GDP was estimated to be $8 billion lower, reflecting both the shutdown and the subsequent resumption of activity once funding resumed.

As a share of quarterly real GDP, the level of GDP in the fourth quarter of 2018 fell by 0.1%, while in the first quarter of 2019 it was down by 0.2%. Although most of the lost output was later recovered, about $3 billion, or 0.02% of projected annual GDP in 2019, was permanently lost, underscoring the economic cost of America’s second-longest government shutdown.

CBO estimated that net discretionary funding for the agencies that were affected by the shutdown totals $329 billion in fiscal year 2019, or about 25 per cent of the total discretionary funding for the federal government.