Economic Outlook
The True Cost of 43-Day Government Shutdown Is Substantial in Disruptions, Economic Losses
By MICHAEL PATON
The 2025 federal government shutdown, which stretched from Oct. 1 to Nov. 12, became the longest shutdown in American history. According to the Brookings Institution, its 43-day duration surpassed the previous record set during the 2018–2019 standoff. While shutdowns are often discussed in terms of political brinkmanship, the real cost lies in the substantial economic disruption, the fiscal inefficiencies imposed on government itself as well as the strain placed on millions of households and businesses.
Economists generally evaluate shutdowns on three levels: the macroeconomic loss of output; the direct financial and operational costs to federal agencies; and the broader effects on households, communities and private businesses.
The shutdown shaved between one and two percentage points off annualized GDP growth in the fourth quarter, according to an Oct. 29, 2025 letter from the Congressional Budget Office (CBO)—creating an immediate and measurable slowdown. While some of this delayed activity is expected to rebound the following quarter, CBO estimated that between $7 billion and $14 billion in economic output would be permanently lost, even after the federal workforce returned. CBS News, summarizing these projections, noted that the midpoint estimate—about $11 billion in unrecoverable losses—is the most reasonable benchmark for assessing the shutdown’s long-run macroeconomic cost.
The short-run damage was equally significant. The National League of Cities, citing CBO data, reported that the shutdown reduced fourth-quarter GDP by roughly $18 billion in that quarter alone. That figure represents factories delaying orders, agencies suspending spending, federal contractors sitting idle, and ordinary consumption falling as workers missed paychecks.
Private forecasters attempted to quantify the day-to-day impact. According to JPMorgan economist Michael Feroli, each week of the shutdown cut roughly one-tenth of a percentage point from annualized GDP growth. Other analyst compilations, reported by CBS News and Bloomberg, suggested that the shutdown cost the broader economy between $7 billion and $16 billion per week, with many settling around a working estimate of $15 billion per week in disrupted or delayed activity.
The direct financial consequences for the government itself were equally striking. Nearly 670,000 federal employees were furloughed, and another 730,000 were required to work without pay. According to CBS News, furloughed worker compensation alone amounted to $400 million per day—wages that ultimately must be paid as back pay, even though no work was performed during the shutdown. This is one of the paradoxes of a shutdown: it does not save money. Instead, it forces agencies to halt operations, then pay later to restart them, process backlogs, reprogram systems, and recover from operational bottlenecks.
CBO’s analysis of the 2018–2019 shutdown offers a useful analogy, noting that the government “lost” roughly $3 billion in output that never returned, even after work resumed. The 2025 shutdown, broader and longer, likely inflicted at least that level of inefficiency, compounded across more agencies.
Beyond the abstract macroeconomic figures, the shutdown created tangible hardships for millions of Americans. Shutdowns rarely touch all federal programs equally; instead, they create uneven disruptions with real human consequences. According to the National League of Cities, nearly 42 million Americans relying on the Supplemental Nutrition Assistance Program (SNAP) faced the prospect of sharp benefit reductions as the Department of Agriculture warned it could only maintain full benefits for a limited period. SNAP infuses roughly $4 billion per month into local economies, particularly grocery stores, farmers and small retailers. Any threat to that flow not only jeopardizes food security for vulnerable families but also strains local business revenues.
The shutdown’s impact on businesses, and small businesses in particular, was another major source of economic damage. Federally backed small-business loans, essential for startups, expansions and payroll continuity, came to a sudden halt. According to the National League of Cities, the shutdown blocked more than 300 small businesses per day from receiving loans, cutting off about $170 million per day in financing. Over the course of the shutdown, roughly 4,800 small businesses were unable to access about $2.5 billion in planned loans. These disruptions do more than simply postpone investment; they lead to cancelled projects, layoffs and, in some cases, the failure of firms that depend on timely credit.
The travel and aviation sectors also felt the strain. Aviation safety inspectors, TSA officers, and air-traffic controllers were working without pay, causing staffing shortages and delays. According to reporting summarized by Bloomberg and CBS News, the weekly cost to the broader travel and tourism industry ran into the billions, contributing to the higher-end estimates of the shutdown’s weekly economic damage.
Taken together, the cost of the 2025 shutdown was substantial. The most defensible baseline number, according to the Congressional Budget Office and reporting by CBS News and Brookings, is a permanent economic loss of about $11 billion, with a wider envelope between $7 billion and $14 billion. The temporary losses—lost output in Q4, disrupted business activity, missed paychecks and foregone sales—amount to many tens of billions more, even if some of that activity rebounds later. And the human costs, reflected in uncertainty, financial stress, delayed childcare, reduced food security and weakened public institutions, extend far beyond what can be captured in standard economic metrics.
About the author: Michael J. Paton is a portfolio manager at Tocqueville Asset Management L.P. He can be reached at 212-698-0800 or by email at MPaton@tocqueville.com.
Published: December 11, 2025.