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1 1 (September 22, 2023)

handle is hein.crs/govemxp0001 and id is 1 raw text is: Congressional ____ R ~Fesearch Service Economic Effects of Government Shutdowns September 22, 2023 If Congress allows appropriations to lapse on October 1, a federal government shutdown would begin. Government shutdowns have direct and indirect impacts on the economy, the severity of which depend largely on the shutdown's length and scope. This Insight discusses the economic effects of shutdowns, including effects on output, employment, and government spending. For information on the impact of a shutdown on government operations, see CRS Report R47693, Government Shutdowns and Executive Branch Operations: Frequently Asked Questions (FAQ), coordinated by Taylor N. Riccard. Economic Effects Many factors determine the extent a shutdown affects the economy, including the length of the shutdown, which programs are excepted and continue to operate in part or full, and whether there is a partial shutdown (i.e., some agencies receive appropriations). Click on the links for CRS products on the economic effects of the FY2014 and FY2019 shutdowns. Government Spending and GDP The goods and services provided by the federal government (excluding government transfers) are a component of economic output, as measured by gross domestic product (GDP), comprising about 7% of GDP. Government shutdowns decrease government spending, so these goods and services cannot be provided, directly decreasing output. The effect can be relatively small, given that shutdowns primarily affect discretionary spending (about 27% of total federal spending), not mandatory spending (i.e., entitlement programs such as Social Security). The timing of a shutdown matters for its effect on output. Absent any policy changes that may be agreed to at the end of a shutdown, the shutdown itself simply delays-as opposed to cancelling-government spending. If a shutdown is brief, then the subsequent catch-up in government spending could occur in the same quarter that spending was delayed. Since GDP is measured on a quarterly basis, there may be little or no measured effect in this case. If a shutdown began October 1 (the beginning of the quarter), it would leave the rest of the quarter for the shutdown to end and spending to catch up. According to the Bureau of Economic Analysis (BEA), it cannot quantify many of the impacts of shutdowns on components of GDP. However, it does estimate effects on non-market services provided by Congressional Research Service https://crsreports.congress.gov IN12248 CRS INSIGHT Prepared for Members and Committees of Congress

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