Lawmakers on Capitol Hill are buckling in for a protracted government shutdown, something that experts say could begin to have a significant impact on the economy and put pressure on President Trump to negotiate a deal with Democrats.
Economic experts say the shutdown won’t have an immediate impact on the economy, but they predict the effect on gross domestic product (GDP) will add up after a few weeks and could become more pronounced because of other economic headwinds, such as the uncertainty created by Trump’s global trade war.
“If the shutdown is a week or two that is no big deal, it’s not going to have much of a macroeconomic impact. … If it lasts a month, six weeks, then that becomes a big deal. Government services are disrupted, the fact that government workers aren’t being paid, starts to do damage,” said Mark Zandi, the chief economist at Moody’s Analytics.
“It also has some impact on financial markets. Global investors would wonder about the governance of the nation and what it all means for paying off the debt in a timely way, but it would have to be a month or longer before that damage is significant to be the forcing mechanism,” he said.
It’s unclear, of course, whether Democrats will feel the most pressure to deal, or if it will be Republicans and Trump.
So far, neither side appears to be that worried about taking heat.
Zandi said the “forcing mechanism” most likely to put pressure on Congress and Trump to make a deal will come on Oct. 15, when members of the military would miss their first paycheck during the shutdown.
About 2.8 million people work for the U.S. military, including 1.3 million active duty troops.
“I’d be surprised if the shutdown extended beyond that, at least to any significant degree, because then our soldiers aren’t being paid, and I think that would be tough politically,” Zandi said.
Both Democrats and Republicans think they have strong public arguments to make that the other side is more to blame for the shutdown.
Republicans point to the fact that the GOP-controlled House passed a “clean” funding bill that would extend existing spending through Nov. 21. They accuse Democrats of voting for the shutdown.
Democrats have argued that health care premiums will rise this fall because Congress has not extended enhanced subsidies under the Affordable Care Act. They also want to reverse cuts to Medicaid that were enacted as part of Trump’s “big, beautiful bill” over the summer. They say the shutdown is about these health care issues.
The GOP has control of the White House and both chambers of Congress, so Democrats also appear to hope that blame will fall on Trump and Republicans because they are seen as holding power. If the economy does have a shutdown-induced hiccup, Democrats see Republicans as likely taking the blame.
The Congressional Budget Office estimated that the 35-day government shutdown at the end of 2018 and beginning of 2019 reduced GDP by 0.2 percent in the first quarter of 2019. The economic impact, however, was mitigated when the government opened back up and federal employees received back pay and started spending again.
“A reasonable good rule of thumb is that for every week the government is shutdown it shaves a tenth of a percent off of annualized GDP growth in the quarter. Less so in week one, week two. More so in week three, four, five,” Zandi explained.
Trump and Republican leaders in Congress say they plan to wait out Democrats until they cave.
Senate Majority Leader John Thune (R-S.D.) plans another vote Friday on a House-passed seven-week government funding bill — even though Senate Democrats have already rejected it three times.
GOP strategists say Thune will keep on bringing the bill to the floor until eight Democrats vote for it, giving it the 60 votes it needs to make it to Trump’s desk.
So far, two Democrats and Sen. Angus King (I-Maine), who caucuses with Democrats, have voted for the GOP bill. Republicans have lost one of their own in Sen. Rand Paul (Ky.).
A Democratic alternative that has also been brought up for votes has not won any GOP support and has not lost votes from Democrats.
Ford O’Connell, a Republican strategist who is close to the Trump White House, said, “Republicans are going to continue sending up those spending bills, the CRs, over and over until Democrats say yes.”
He argued the “ball is not in Trump’s court,” pointing to a recent New York Times/Siena College poll of 1,313 registered voters nationwide showing that 65 percent of respondents said Democrats should not shut down the government, even if their demands are not met.
Yet O’Connell acknowledge that Trump’s goal is “to get the country back to working order” but predicted “Democrats are now going to learn about the ‘Art of the Deal’ and get even less than they were in the first go-around.”
Speaker Mike Johnson (R-La.) has embraced Thune’s plan and says he will not bring an alternative funding bill to the House floor, telling reporters, “there isn’t anything we can do to make this bill any better for them,” referring to the Democrats.
A key difference between the current shutdown and those of the past is that Trump and Office of Management and Budget (OMB) Director Russell Vought are threatening to use the shutdown to lay off thousands of federal employees permanently.
Vought told Republicans in a call Wednesday that layoffs of federal workers will be coming this week.
Jared Bernstein, the former chair of the U.S. Council of Economic Advisers under President Biden, said the broader economic impact of the shutdown is “somewhat conditional on whether they’re truly intending to fire versus temporarily furlough federal workers.
He warned if thousands of federal workers are laid off permanently, “then you have an economic problem sooner than later.”
“You’re exacerbating an existing problem, which is the job market is already showing some cracks,” he said. “That would be very problematic.”
ADP, the payroll processor, announced Wednesday that the U.S. economy lost 32,000 jobs in September.
The Bureau of Labor Statistics reported last month that the economy created only 22,000 jobs in August, and revised data showed that employment dropped by 13,000 jobs in June.
“If it’s a typical shutdown and it lasts a few weeks, then any minimal economic damage is pretty quickly made up. Anything that’s longer than usual, it’s a problem in two senses: One, people can only go for so long without a paycheck. … In terms of the macroeconomy, especially given some of the shakiness, uncertainty, cracks in the jobs market, nervousness about pricing, inflationary pressures — I would say anything more than two weeks I’d get more nervous than usual,” Bernstein said.
The Trump administration this week announced it would freeze $18 billion in funding for infrastructure projects in New York City because of the shutdown and cancel $7.5 billion in Biden-era funding for hundreds of energy projects primarily in Democratic-represented states.
Rodell Mollineau, a Democratic strategist and former Senate leadership aide, said Trump wants to punish Democrats and put pressure on them to make a deal but that the actions could also cause “pain for American citizens” and potentially backfire on Republicans.
A Washington Post poll of 1,010 people released Thursday showed that 47 percent of respondents blamed Trump and the Republicans for the shutdown while 30 percent blamed the Democrats in Congress and 23 percent were unsure.
Critically, 50 percent of independents surveyed by the poll blamed Trump and Republicans for the shutdown while only 22 percent blamed Democrats.
Gbenga Ajilore, the chief economist at Center on Budget and Policy Priorities, a left-leaning research and policy institute, said the main issue with the shutdown is the impact on the federal workforce and the impact on federal services, such as delays at airports caused by the Federal Aviation Administration and the Transportation Security Administration.
U.S. airlines have warned that flights will likely be delayed during the shutdown.
Ajilore said the big question is how the administration will “prioritize” spending obligations to shape the shutdown’s impact on the broader public.
Even before the shutdown, Zandi said the probability of a recession over the next 12 months was uncomfortably high.
“The economy is going to be most vulnerable this quarter, next quarter, early 2026. If there’s going to be a recession because of tariffs and immigration and DOGE [cuts] and other policy, then it’s going to be here in the near future, in the next three, six, nine months,” he said. “A government shutdown by itself, I don’t think that’s not going to do it unless it continues on for more than a month or so.”
He also said that rising health care premiums as a result of the expiring enhanced subsidies under the Affordable Care Act could be an added “weight on the economy” as households that lose subsidies will pay more for insurance and “be less avid consumers.”
But he cautioned that economic impact of reduced health care subsidies would be offset by the economic stimulus such as corporate tax cuts included in Trump’s One Big Beautiful Bill Act, which was enacted in July.
