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What happens if the federal government closes for business?

January 17, 2018

Terry Clower

If the federal government shuts down, the economic impact on the Washington, D.C., regional economy will depend largely on the length of time workers are away from their jobs, a George Mason University professor said.

“As individuals or companies, we do not change our purchasing behavior much if we have an income disruption of just a few days,” said Terry Clower, director of George Mason’s Center for Regional Analysis at the Schar School of Policy and Government.

If Congress and President Donald Trump can’t come to terms on several pending issues—including the fate of 690,000 “Dreamers,” and at least partial funding to begin building a border wall with Mexico—the federal government could shut down after midnight Friday.

A temporary spending bill could delay that reckoning, though through Tuesday there had been no talks since negotiations broke down last week.

If no agreement is reached, Washington, D.C.-area residents who work for or with the government and are deemed nonessential will not return to their jobs unless funding is restored.

Stephen Fuller

The 16-day shutdown in 2013 cost the U.S. economy $24 billion, according to Standard & Poor’s. According to an analysis done at the time by Mason professor Stephen Fuller, director of the Stephen S. Fuller Institute, said the D.C. area lost $220 million in federal payroll per day, The Washington Post reported.

So what’s the bottom line if the federal government shuts down this year?

“If it’s just a few days, and federal workers get back pay, the impacts are negative, but mild,” Clower said. “If the shutdown lasts weeks, then you will get an absolute loss in consumption spending in the region, even if federal employees eventually get back pay. Moreover, those providing contracted services to government agencies would see an absolute loss of revenue.”

Terry Clower can be reached at 703-993-8419 or tclower@gmu.edu.

Stephen Fuller can be reached at 703-993-3186 or sfuller2@gmu.edu.

For more information, contact Buzz McClain at 703-727-0230 or bmcclai2@gmu.edu.

About George Mason

George Mason University is Virginia’s largest public research university. Located near Washington, D.C., Mason enrolls 36,000 students from 130 countries and all 50 states. Mason has grown rapidly over the past half-century and is recognized for its innovation and entrepreneurship, remarkable diversity and commitment to accessibility.