BILLIONS LOST: Economist reveals real weekly cost of the government shutdown

Key Concepts

• Government Shutdown
• Economic Impact of Shutdown
• GDP Growth
• Job Losses
• Treasury Department Policies
• Tax Relief
• Capital Expenditures
• Tariff Authority
• Reindustrialization
• Supply Chains
• National Security
• Economic Security

Economic Repercussions of Government Shutdown

The transcript discusses the significant economic fallout from a recent government shutdown, which lasted for 43 days. Federal agencies are recalling workers following the signing of a short-term funding bill.

Key Economic Data and Estimates

• Delayed Data Release: The Labor Department has not released key economic data for over a month. The October jobs report may not be released at all, leaving the Federal Reserve without official data on jobs, including the updated employment and unemployment rates, for their next meeting. The Bureau of Labor Statistics (BLS) is still assessing the backlog.
• Shutdown Cost Estimates:
  • A report from Jefferies estimates the shutdown cost roughly $15 billion per week.
  • The Council of Economic Advisors (CEA) arrived at a similar number, estimating the total cost to be around $90 billion.
  • This cost is equivalent to upwards of 0.7% of GDP and nearly $700 per household.
• Impact on GDP: Fourth-quarter GDP is likely to fall to 1.5%.
• Job Losses: Approximately 60,000 non-federal workers lost their jobs during the shutdown.

Arguments and Perspectives on the Shutdown

• Treasury Counselor Joe LaBoyna's View:
  • LaBoyna agrees with the Jefferies and CEA assessments, emphasizing the substantial economic cost and hardship caused by the shutdown.
  • He refers to this economic loss as "deadweight loss," meaning the lost output will not be recovered.
  • He states that the shutdown "did not need to happen" and that the President and Treasury Secretary had pleaded with Democrats to pass a clean Continuing Resolution (CR), which they ultimately did.
  • He expresses gratitude that some members of the opposition came to their senses and supported the bill, leading to the government's reopening.

Broader Economic Implications

• Sectoral Impact: Various sectors, including financials, IPOs, and travel, will need to discuss the shutdown's impact during their fourth-quarter earnings reports.
• Resilient Economy: The transcript highlights President Trump's promise of a resilient economy. The second quarter, when he fully assumed office, saw the economy (excluding federal spending) grow by 4.5%.
• Growth Projections: The economy was on track for growth in the fourth quarter, but this growth will now be cut in half due to the shutdown.
• Underlying Economic Strength: The economy's underlying foundation is considered strong due to President Trump's policies, particularly the "one big beautiful bill" signed in July, which provides significant tax relief to middle and lower-income families. This relief includes no tax on tips and overtime, with people expected to see upwards of $200 billion in refunds in the first quarter.
• Future Outlook: 2026 is projected to be a very strong year.

White House Policies and Initiatives

The transcript outlines several new policies being rolled out by the President to ease pressure on household budgets and stimulate economic growth.

Proposed Relief Measures

• $2,000 Checks: A proposal for $2,000 checks funded by tariff revenue. There is debate on this, with a suggestion to use the money to pay down the $38 trillion debt instead.
• Beef Price Probe: An investigation into rising beef prices.
• Weight Loss Drug Cost Reduction: A deal aimed at lowering the cost of weight loss drugs.
• 50-Year Mortgage Option: Floating the idea of a 50-year mortgage option.
• Direct Health Insurance Subsidies: Direct subsidies for health insurance.
• Tariff Cuts: Preparation for tariff cuts on key grocery items.
• Trade Framework Deals: Trade framework deals across Latin America.

Pro-Growth Supply-Side Policies

• Capital Expenditure Boom: The President is inspiring a "pro-growth supply-side boom," similar to the first term but accelerated.
• 100% Expensing: A key policy is 100% expensing on all capital expenditures, including factories, which has never been done before.
• IRS Guidelines: The IRS will have guidelines in place by year-end for this expensing policy.
• Expected Outcome: This is expected to lead to a "huge boom next year," driven by American workers building factories and using the equipment. This will lift productivity, living standards, and wages, leading to significant affordability improvements and surging after-tax real incomes for Americans.
• Median Household Income: During the first administration, median household income rose nearly $7,000 in the first few years, the largest cumulative increase, about three-fold from the previous 16 years.

Supreme Court and Tariff Authority

The transcript discusses the Supreme Court's review of President Trump's emergency tariff authority, with significant implications for government revenue and presidential trade powers.

Key Arguments and Expectations

• Administration's Optimism: The administration is optimistic the Supreme Court will rule in their favor.
• Secretary's Assessment: The Secretary of the Treasury, who heard the arguments, stated that the administration's arguments were "very powerful" and "the better arguments."
• Potential Ruling Impact: A ruling against the administration could mean the government would have to pay back upwards of $200 billion in tariff revenue.
• Backup Options: If the court rules against them, there are considered options to offset the impact. These provisions are intended to support the U.S. economy and achieve President Trump's goals.
• Importance of Tariffs: Tariffs are considered a "pivotal policy" for reindustrializing the U.S. manufacturing base, which has suffered significantly over the past 25 years. They are also key to incentivizing capital to come into the U.S., improving supply chains, and enhancing national security through economic security.
• Legal Basis: The administration believes they have backup in terms of Section 232, Section 301, and about five other relevant sections to support the U.S. economy.

Conclusion

The government shutdown caused significant economic damage, estimated to be around $90 billion, leading to reduced GDP growth and job losses. However, the administration emphasizes the underlying strength of the U.S. economy, driven by President Trump's pro-growth policies, including tax relief and 100% expensing for capital expenditures. The outcome of the Supreme Court's decision on tariff authority is crucial, but the administration is confident in its legal standing and has backup plans to ensure its economic and reindustrialization goals are met.