Sen. James Lankford, R-Okla., joins “Varney & Co.” to discuss the government shutdown, Chinese restrictions on rare earth trade, and their impact on U.S. security and the economy.
Secretary of the Treasury Scott Bessant said Wednesday that the current government shutdown could cost the U.S. economy billions of dollars a day.
Bessent told a press conference that the party government shutdown “starting to build muscle here” as the shutdown continues into its third week.
“We believe this shutdown could start to cost the U.S. economy as much as $15 billion a day,” Bessent said. The shutdown began on October 1, with Congress and the White House failing to pass a funding bill when fiscal year 2026 began that day.
The Treasury secretary called on moderate Senate Democrats to “be heroes” and “break away from the hive of radicalism” by supporting Senate Republicans’ continuing resolution and voting to “reopen government for the American people.”
TRUMP OFFICIAL SAYS FEDERAL JOB CUTS WILL REACH 10,000 DURING SHUTDOWN AS JUDGE PUT LAYS ON HOLD
Treasury Secretary Scott Bessent said the current government shutdown could cost the economy $15 billion a day. (Elizabeth Frantz/Reuters / Reuters Photos)
Senate Democrats blocked the stopgap funding measure nine times after another failed vote Wednesday. Democrats are calling for an extension of health insurance subsidies under Obamacare, which expire this year. The temporary subsidies, which are direct payments made to insurance companies in exchange for lower premiums, were passed in the American Rescue Plan in 2021 and extended through the end of 2025 in the Inflation Reduction Act. The law allowed those earning 400 percent above the poverty line to benefit from subsidized premium rates.
Government shutdowns have occurred periodically since 1995, when Republicans took control of Congress for the first time in 40 years. Non-essential workers are furloughed during a shutdown, while essential workers remain on the job — although both groups won’t receive paychecks under federal law until government funding ends.
The closures have generally had a minimal impact on the economy, although it is not yet clear what the toll of the current shutdown will be.
Mass layoffs ‘have begun’ as government shutdown continues
The government shutdown began on October 1. (Bill Clark/CQ-Roll Call, Inc/Getty Images / Getty Images)
Federal Reserve Bank of Chicago President Austan Goolsbee said during a discussion moderated by FOX Business’ Edward Lawrence earlier this month at the Midwest Agriculture Conference that while the central bank is not involved during shutdowns, the economic impact varies depending on the length and magnitude of the federal funding gap.
“Historically, low-level shutdowns that don’t last very long don’t do anything to the overall economy because, yes, they haven’t been paid for, but people’s spending doesn’t go down because they know they’re going to get paid eventually,” Goolsbee said.
“So it depends on how long it lasts. It depends on how big it is. If there are reasons why this ruling seems different from previous ones, then we’ll have to revise it. But that’s sort of the starting point,” he added.
FORECAST MARKETS SEE CLOUDY OUTLOOK AS TRADERS BET ON EXTENDED SHUTDOWN
House Minority Leader Hakeem Jeffries, D-N.Y., and Senate Minority Leader Chuck Schumer, D-N.Y., are calling for the extension of expiring Obamacare subsidies. (Nathan Posner/Anadolu/Getty Images / Getty Images)
An analysis by Goldman Sachs economists indicates that most government shutdowns have been short-lived, and the longest shutdown in 2018 lasted 35 days — although it only affected about 15% of the federal government, with Congress funding about 85% of its operations at the time.
Goldman found that for every week of government shutdown, federal furloughs would decline quarter over quarter. economic growth of around 0.15 percentage points of GDP in the fourth quarter, with a positive effect of equal magnitude on first quarter growth assuming the lockdown ends by then.
The company’s analysis also found that a shutdown could temporarily increase the unemployment rate, but the effect is expected to be minimal as furloughed workers are reported as unemployed and temporarily laid off.
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The OMB analyzed the shutdown in fiscal year 2014 and noted that there were some areas of economic disruption caused by the shutdown.
These included stopping permitting, reviews and licensing (as for energy projects); suspension of IRS income verification for financial institutions monitoring borrowers; stopping hundreds of small business loans; as well as disruptions to tourism and travel due to the closure of national parks.
