Fact Check: Is the Shutdown Destroying the US Economy?

Fact Check: Is the Shutdown Destroying the US Economy?
Fact Check: Is the Shutdown Destroying the US Economy?

The ongoing government shutdown – well into its fifth week – is making the headlines for all sorts of reasons, but recently, experts have started warning that it’s causing major damage to the country’s economy. That hasn’t been a factor in previous shutdowns because they’ve rarely lasted more than a week or two, but this one has gone on much longer. Are the Democrats’ political games starting to make us all poorer?

Highlight

  • The US has a free market economy, so in theory at least, the government’s role in the economy is just to set policies – which it’s still doing – and siphon off money from it in the shape of taxes. Yes, it’s still doing that too.
  • This means that, unlike in a socialist planned economy, businesses should keep running just fine whether the government is having a tantrum – sorry, shutdown – or not.
  • In reality, though, the shutdown will potentially have a huge economic impact. That’s because the government spends vast amounts of our money, and a lot of that spending goes to paying private companies for goods and services. Those companies employ workers, pay taxes and buy goods and services from other companies, boosting the economy – not as much as if we spent that money ourselves, because government is inefficient, but boosting it anyway.
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  • Now the government is still collecting all that money (meaning we can’t spend it ourselves) but the shutdown means it can’t make a lot of the payments it was planning to. That means the money is just being taken out of the economy for no purpose.
  • We’ve heard a lot about the 800,000 government employees who’re not getting paid – but no less than four million private-sector jobs depend on federal spending. A lot of them aren’t getting paid either, and unlike government workers they won’t be compensated when the shutdown ends.
  • When the shutdown began, the White House estimated it would cut 0.08 percent of GDP for each week it lasted. That estimate has now been increased to 0.13 percent – well over a billion dollars a week lost to the country.

By some estimates, the shutdown has already cost the US as much as the $5.7 billion the president wants to build the wall. If Congress had just agreed the funding in the first place we’d have just as much money and a more secure border with Mexico.

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