Economic Impact of DHS Shutdown

WASHINGTON — According to White House economists, the ongoing month-long shutdown of the Department of Homeland Security has caused an estimated $2.5 billion loss to the economy. This figure is in addition to over $90 billion in losses resulting from last year’s unprecedented shutdowns.

The current estimate from the White House Council of Economic Advisers is described as a “very conservative number” that only considers the immediate impacts of government spending cuts, overlooking the broader repercussions of a partial DHS shutdown.

“Every day that goes by, more Americans are feeling the pinch due to the Democrats’ decision to shut down DHS,” stated White House Press Secretary Abigail Jackson. She emphasized that the consequences extend to numerous DHS employees losing paychecks and countless travelers facing delays at airports, illustrating the real-world effects of political conflicts.

The projected quarterly gross domestic product (GDP) loss of $2.5 billion reflects lost wages for government workers and contractors, failing to encompass further economic ramifications such as travel disruptions and decreases in consumer expenditure.

It’s estimated that the travel industry is losing about $1 billion a week because of the DHS shutdown. Airport delays and increased wait times have skyrocketed since the partial closure began, severely affecting travel across the country.

However, the full economic impact will likely become clearer over time. Jessica Riedl, a researcher at the Brookings Institution, pointed out that delays at airports and with Coast Guard inspections are significant hurdles in transporting goods and people, making it tough to quantify the shutdown’s overall economic effect.

“As the situation drags on, it will become increasingly challenging to get people and goods where they need to be, leading to a ripple effect on business activities and consumer spending,” she added.

In contrast, last year’s government shutdown, which lasted for 43 days, incurred costs estimated at about $15 billion per week. This figure presents a broader view of the economic damage compared to the current $2.5 billion estimate related to DHS funding lapses, indicating far-reaching direct and indirect costs totaling over $90 billion.

Combined with the current shutdown chaos, the overall economic fallout due to political maneuvering amounts to nearly $93 billion. This past shutdown also resulted in a 1.5 percentage point reduction in GDP growth during the fourth quarter, according to analyses from the Congressional Budget Office (CBO).

The CBO has estimated that damages from the six-week government shutdown could be anywhere between $7 billion and $14 billion, with many impacts likely permanent. However, they have not yet provided an estimate for the GDP consequences of the current DHS funding expiration.

Riedl believes that localized economic damage will be more pronounced in areas with significant airport activity, which may impact tourism and travel capabilities, rather than significantly altering broader economic indicators.

The current collapse in DHS operations is hitting the travel sector particularly hard, and if the deadlock continues, the situation is likely to worsen.

A TSA official has warned that ongoing partial funding could lead to airport closures. Eric Hansen, representing the U.S. Travel Association, suggested that the earlier shutdown’s impact on travelers might repeat itself. “Last time, we saw more than 6 million travelers affected, and that’s not a record Congress wishes to break,” he mentioned.

This is actually the third partial government shutdown in just six months, including a brief four-day lapse in late January. Security screening wait times have soared dramatically, with delays reaching as high as three to four hours. Additionally, around 370 TSA employees have resigned over the past month, intensifying staffing shortages.

“TSA officers are crucial to national security within our aviation system,” Hansen said, noting their significant achievements in identifying weapons last year. “They’re facing immense pressure, leading to increased risks as fewer staff have to screen more travelers.”

TSA Acting Deputy Administrator Adam Stahl noted that if the shutdown drags on, smaller airports might have to close due to increasing staffing pressures.

This funding lapse coincides with rising national security worries, particularly with tensions related to Iran. “The Coast Guard is part of our military and current conflicts only exacerbate vulnerabilities,” commented Lora Reese from the Heritage Foundation. “Democrats are playing a dangerous game when it comes to national security.”

Long-term issues are pretty concerning, too, as DHS may struggle with hiring and retaining employees moving forward. A DHS representative informed that about 100,000 employees have missed out on their full paychecks, translating to approximately $1 billion in unpaid wages monthly as a result of the shutdown, prompting difficulties for many to afford rent, groceries, and transportation.

Research from the University of Virginia Darden School of Business indicated that government workers facing pay cuts due to the shutdown are experiencing morale issues akin to a 10% pay reduction.

The DHS has been partially shut down since February 14, chiefly due to Senate Democrats delaying funding bills while Republicans seek new immigration enforcement policies regarded as deal-breakers.

Recently, Democrats proposed a counteroffer to the White House after an extended negotiation period, although Senate Minority Leader John Thune remarked that it was “not very different from where we currently stand,” expressing hope for a resolution.