• Federal Reserve Governor Christopher Waller warns extended government shutdown would have significant negative economic consequences
  • Current shutdown in third week is costing economy up to $15 billion daily and subtracting 0.1-0.15% from quarterly GDP growth
  • Negotiations remain stalled over health insurance subsidies with no resolution in sight

Federal Reserve Governor Christopher Waller has issued a stark warning about the economic consequences of the ongoing government shutdown, now entering its third week, stating that extended closures would cause deeper economic damage, particularly if they lead to permanent cuts in federal staffing or spending.

The shutdown, which began October 1 due to a congressional impasse over federal spending, has already forced furloughs of hundreds of thousands of federal workers and disrupted numerous non-essential services. Treasury Secretary Scott Bessent estimates the economic damage at up to $15 billion per day, with each week of closure subtracting approximately 0.1-0.15% from annualized fourth-quarter GDP growth, according to analyses by J.P. Morgan and Goldman Sachs.

"The longer this continues, the more severe the economic impact becomes," Waller noted in his assessment, emphasizing that while some lost GDP might rebound if the shutdown is resolved quickly, prolonged closures risk permanent job losses and weaker consumer spending.

Efforts to reach a compromise have repeatedly failed, with Senate Democrats blocking Republican-led stopgap funding measures. The impasse centers on expiring Affordable Care Act subsidies, which are set to lapse this year without congressional action. Treasury Secretary Bessent has called for moderate Democrats to support reopening measures, blaming "radicalism" for the prolonged shutdown.

Market participants are watching the situation closely, though stocks have remained relatively resilient so far. Gold has surged as a safe-haven asset, while the U.S. dollar has experienced some volatility. Analysts warn that sentiment could deteriorate sharply if the impasse continues much longer.

The current shutdown, now approaching the three-week mark, risks surpassing the economic damage of the 2018 shutdown that lasted 35 days. That event affected about 15% of federal operations, but experts note current disruptions to essential services could be wider than in past events.

Federal Reserve officials have been monitoring the situation closely, with the shutdown complicating the economic data they rely on for policy decisions. The central bank had been expected to consider rate moves in early 2026, but the ongoing fiscal uncertainty has muddied the outlook.

Attempts to reach congressional leadership for comment on the latest developments were unsuccessful Thursday afternoon. Staffers from both parties, speaking on condition of anonymity, described the negotiations as "effectively frozen" with little movement expected before the weekend.

Correction: An earlier version of this article misstated the duration of the current shutdown. It began on October 1, 2025, and is now in its third week.