The ongoing federal government shutdown could wipe out up to $14 billion in economic output and drag fourth-quarter growth down by as much as two percentage points, according to new estimates from the Congressional Budget Office.
According to a new analysis from the Congressional Budget Office (CBO), the ongoing federal government shutdown, which began on October 1, could shave up to two percentage points from real GDP growth this quarter and permanently erase as much as $14 billion in economic output — even if most spending eventually resumes.
CBO analyzed three shutdown durations — four, six, and eight weeks — and found that each would slow economic growth and delay billions in federal spending across payroll, contracts, and public assistance programs such as SNAP.
While the CBO expects the economy to rebound once the shutdown ends, some lost output — primarily from furloughed workers’ missed hours — will never be recovered.
Short-Term Slowdown, Long-Term Drag
In its letter to House Budget Chairman Jodey Arrington, CBO Director Phillip Swagel explained that the shutdown delays roughly $33 billion to $74 billion in federal outlays, depending on its length. Most of that spending would eventually flow back into the economy, but not fast enough to offset near-term losses.
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A four-week shutdown would lower fourth-quarter GDP by 1.0 percentage point and permanently cost $7 billion in lost output.
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A six-week shutdown would reduce growth by 1.5 points and cost $11 billion.
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An eight-week shutdown would cut growth by 2.0 points and cost $14 billion.
Even with a rebound next quarter, the cumulative damage to productivity, private demand, and consumer confidence lingers well into 2026.
Spending on Hold
CBO estimates the shutdown delays:
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$9–23 billion in federal employee pay (for both furloughed and “excepted” workers still reporting without pay).
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$24–48 billion in spending on goods and services, from research contracts to infrastructure projects.
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Up to $4 billion in delayed Supplemental Nutrition Assistance Program (SNAP) payments if the shutdown extends past November 1.
Roughly 650,000 federal employees are furloughed each week, while 600,000 continue working without pay. Once the shutdown ends, both groups will receive retroactive pay — a factor that will briefly lift GDP in early 2026 as spending rebounds.
Maryland Impact: Real Fiscal and Community Risks
As previously reported on Conduit Street, MACo has offered a deeper look at the ripple effects of federal government shutdowns.
In Maryland, the shutdown’s impact reaches far beyond Washington. With nearly 300,000 federal employees and more than 200,000 contractors residing and working in the state, counties face significant fiscal and community risks if the impasse persists.
Lost wages, delayed reimbursements, and stalled projects threaten to strain local economies and county budgets. Federal pay accounts for roughly 12% of all income earned in Maryland, and in Southern Maryland, where federal and defense installations dominate, nearly one in four households relies directly on federal paychecks. Including contractors pushes that share to almost half of the local economy.
During the 2018–2019 shutdown, Marylanders lost an estimated $778 million in wages, translating to roughly $700,000 in lost state and local tax revenue per day.
State leaders have already reactivated tools developed after the last shutdown. The Department of Labor has relaunched its no-interest loan program for “excepted” federal workers, while furloughed employees can apply for unemployment assistance. Governor Moore’s administration has expanded in-person claims support and trained additional staff to handle the surge in requests.
Still, counties bear the brunt of service continuity. As reimbursements stall and uncertainty mounts, counties must fill gaps to maintain stability for residents who depend on consistent public services.
As the shutdown continues, county governments are monitoring budgets, public services, and local economies with growing concern. Federal wages anchor household incomes, sustain small businesses, and underpin the State’s revenue base.
Every missed paycheck or delayed reimbursement compounds the strain on Maryland communities that depend on consistent, reliable operations from their federal partners.
Read the CBO letter here.
Stay tuned to Conduit Street for more information.
Useful Links
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