Economists have just begun to calculate the cost of the government shutdown. What is the lost value of paying 800,000 federal employees for work they didn’t do? What about the economic losses for national parks not visited? Machinery not exported? Fishing permits not issued? What about the impact of those who bore the brunt of the burden: low-level contractors, including cafeteria workers and janitors, who won’t get compensation checks? If you add it all up, according to Standard & Poors, the tally could reach $24 billion.
Some might be erased over time, as federal workers start spending again to make up for the time when they weren’t getting paid. But the biggest cost lies in the erosion of faith in the economy itself.
According to polls from both Gallup and Rasmussen, consumer confidence fell farther during the shutdown than at any time since the financial crisis of 2008. In Gallup’s index, confidence plummeted from -19 points to -34, a free fall not seen since the collapse of Lehman Brothers. The Rasmussen Consumer Index fell from 103 to 88.4.
Sadly, this comes as consumer confidence was starting to rebound from years of recession. In May, Gallup’s confidence index reached its highest point in five years: -4. In June, the Rasmussen index hit it’s highest number since October 2007.
It is not too late for Congress to restore economic confidence with a longer-term budget deal. But the numbers make clear that if shutting down the government becomes an annual political tactic, the cost in consumer confidence will be enormous. When people have confidence, they buy more, hire more, and give more. When they lack confidence, all of those things are put on hold. The cumulative effect could starve off economic growth for years to come.