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The FY2014 Government Shutdown: Economic Effects

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Congressional rept.

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The federal government experienced a funding gap beginning on October 1, 2013, which ended when the Continuing Appropriations Act P.L. 113-46 was signed into law on October 17, 2013. This funding gap resulted in a government shutdown and the furlough of federal employees who were not excepted some third-party sources estimated that up to 800,000 federal employees were initially furloughed. The Continuing Appropriations Act also temporarily suspended the statutory debt limit through February 7, 2014. This report discusses the effects of the FY2014 government shutdown on the economy. It also reviews third-party estimates of the effects of the shutdown on the economy, which predicted a reduction in gross domestic product GDP growth of at least 0.1 percentage points for each week of the shutdown, with a cumulative effect of up to 0.6 percentage points in the fourth quarter of 2013. The Congressional Research Service does not plan to provide an independent estimate of the economic impact of the shutdown. The government shutdown had both direct and indirect effects on economic growth. It directly reduced GDP because government spending is a component of GDP. Assuming the funding levels enacted on October 17 were the same as the funding levels that would have been enacted on September 30 had a shutdown not occurred, some spending would be delayed, but not permanently reduced. For example, furloughed federal employees were paid in full, but late. Since the shutdown occurred at the beginning of the quarter, much of the delayed spending may occur before the quarter is over. An example of a potential indirect effect is a reduction in private consumption or business investment because of a decline in consumer confidence, which surveys reported in October. Some indirect effects may be attributable to the debt limit impasse, however, which occurred at the same time as the shutdown.

Subject Categories:

  • Economics and Cost Analysis
  • Government and Political Science
  • Sociology and Law

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