Impacts and Costs of the Government Shutdown

As the President has said, the shutdown that occurred last month inflicted completely unnecessary damage on our economy and took a toll on families and businesses across the country. Today, OMB is releasing a report that catalogs the breadth and depth of this damage, and details the various impacts and costs of the October 2013 Federal government shutdown.

The report explains in detail the economic, budgetary, and programmatic costs of the shutdown. These costs include economic disruption, negative impacts on Federal programs and services that support American businesses and individuals, costs to the government, and impacts on the Federal workforce.

While the report covers a variety of areas, it highlights five key impacts and costs.

First, Federal employees were furloughed for a combined total of 6.6 million days, more than in any previous government shutdown. At its peak, about 850,000 individuals per day were furloughed. That number fell once most Department of Defense civilian employees were able to return to work as the Pentagon implemented the Pay Our Military Act.

Second, the shutdown cost the Federal government billions of dollars. The payroll cost of furloughed employee salaries alone – that is, the lost productivity of furloughed workers – was $2.0 billion. Beyond this, the Federal government also incurred other direct costs as a result of the shutdown. Fees went uncollected; IRS enforcement and other program integrity measures were halted; and the Federal government had to pay additional interest on payments that were late because of the shutdown.

Third, the shutdown had significant negative effects on the economy. The Council of Economic Advisers has estimated that the combination of the shutdown and debt limit brinksmanship resulted in 120,000 fewer private sector jobs created during the first two weeks of October. And multiple surveys have shown that consumer and business confidence was badly damaged.

The report highlights some of the more direct impacts the shutdown had on the economy by shutting down government services. For example:

• Federal permitting and environmental and other reviews were halted, delaying job-creating transportation and energy projects.
• Import and export licenses and applications were put on hold, negatively impacting trade.
• Federal loans to small businesses, homeowners, and families in rural communities were put on hold.
• Private-sector lending to individuals and small businesses was disrupted, because banks and lenders couldn’t access government income and Social Security Number verification services.
• Travel and tourism was disrupted at national parks and monuments across the country, hurting the surrounding local economies.

Fourth, the shutdown impacted millions of Americans who rely on critical programs and services halted by the shutdown. For example:

• Hundreds of patients were prevented from enrolling in clinical trials at the National Institutes of Health.
• Almost $4 billion in tax refunds were delayed.
• Agencies from the Food and Drug Administration to the Environmental Protection Agency had to cancel health and safety inspections, while the National Transportation Safety Board was unable to investigate airplane accidents in a timely fashion.
• Critical government-sponsored scientific research was put on hold. Notably, four of the five Nobel prize winning scientists who work for the Federal government were furloughed during the shutdown. 

Fifth, the shutdown could have a long-term impact on our ability to attract and retain the skilled and driven workforce that the Federal government needs. The shutdown followed a three-year pay freeze for Federal employees, cuts in training and support, and, for hundreds of thousands of workers, administrative furloughs earlier this year because of sequestration. These cuts will make it harder for the government to attract and retain the talent it needs to provide top level service to the American people.

The report makes clear that the costs and impacts of the shutdown were significant and widespread, and demonstrates why this type of self-inflicted wound should not occur again.

Sylvia Mathews Burwell is the Director of the Office of Management and Budget.