NC Budget and Tax Center

Trump Administration admits economic damage of shutdown more than twice what originally claimed

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Kevin Hassett is the chairman of the White House Council of Economic Advisors, a group that is supposed to inject reason and rigor into the administration’s economic worldview. On Tuesday, he admitted that the shutdown is inflicting more than twice the damage on the economy than the President’s economic advisors had previously claimed, and even Hassett’s new estimate still fails to face the true economic bill that Trump’s shutdown is running up.

“We’ve been watching the actual effects, and noticing that the impact we see on government contractors is bigger than the sort of staff rule-of-thumb anticipated.”

This simple quote is revealing in a number of ways.

Hassett and his team weren’t just a little off — they weren’t even in the neighborhood of the right ballpark. The Council of Economic Advisors now admits that the economic damage is likely to be worse every week than what they had originally claimed would take two weeks to occur. We all make mistakes, but for a group whose core mission is to generate reliable economic estimates, that’s a big error.

Hassett’s language also reveals a lack of planning and forethought within the Administration. The choice to close government appears to have considered little more than “staff rule-of-thumb”, rather than a serious attempt to predict the economic consequences that would come from it. Partially shutting down a big chunk of our government is not rule-of-thumb stuff — it’s a major decision that should never be taken lightly.

The same lack of serious thought was also on display a few days ago, when Hassett opined that federal employees should be delighted that they’re getting a free vacation (quote begins around the 4:30 mark in this video), and that “in some sense they’re better off”.

Even now, the Trump administration still hasn’t fully grappled with the economic injury it is inflicting on our country. With the Federal Government partially incapacitated, key vertebra in America’s economic backbone are suddenly missing. Beyond federal contractors and employees not getting paid, a host of vital economic services are going undelivered. As we have covered before, home loans are not being underwritten, businesses can’t get advice in preparing their taxes, farmers are missing out on crop reimbursements, environmental permitting is not happening, and even breweries can’t get their spring drafts approved. The President’s economic advisors have not released any rigorous analysis of how the failure to discharge these critical functions could undermine our economy, so even the new estimates that Hassett revealed this week are likely to prove an inadequate assessment.

Concerns about undermining growth are particularly pressing given the range of risks currently facing the global economy. We’ve had a long run of steady economic growth, but the list of risk factors that could derail that record are growing. Against that backdrop, it is all the more incumbent on the Administration to consider all of the ramifications of their policy choices.

Trump’s advisors may not have adequately foretold what would come from shuttering the people’s government, but the real-world consequences of the President’s decision become clearer by the day.

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