Government Shutdown Dents Q4 Economic Growth

CBO estimates shutdown subtracted 1.5 percentage points from GDP

Published on Feb. 28, 2026

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U.S. economic growth slowed more than expected in the fourth quarter of 2025, with the nonpartisan Congressional Budget Office estimating that the government shutdown that year would subtract 1.5 percentage points from GDP. However, tax cuts and investment in artificial intelligence are expected to support economic activity in 2026.

Why it matters

The government shutdown had a significant negative impact on the U.S. economy in the fourth quarter, underscoring the broader economic consequences of political gridlock and dysfunction in Washington. While the economy is expected to rebound in 2026, the shutdown serves as a reminder of the fragility of growth and the need for policymakers to avoid self-inflicted wounds.

The details

The slowdown in economic growth during the fourth quarter of 2025 was attributed to disruptions from the government shutdown as well as a moderation in consumer spending. However, tax cuts and increased investment in emerging technologies like artificial intelligence are expected to provide a boost to economic activity in 2026.

  • The government shutdown occurred in late 2025.

The players

Congressional Budget Office

A nonpartisan federal agency that provides budget and economic analysis to Congress.

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The takeaway

The government shutdown's impact on the economy underscores the need for policymakers to avoid political gridlock that can undermine economic growth. While the outlook for 2026 is more positive, the shutdown serves as a cautionary tale about the fragility of the recovery and the importance of stable, predictable policymaking.