• Economist Kevin Hassett forecasts a 1.5% reduction in U.S. GDP for the fourth quarter of 2025, attributing the sharp decline to the ongoing federal government shutdown.
  • The Congressional Budget Office estimates the shutdown is draining approximately $15 billion per week from the economy, creating significant drag and job losses.
  • The impasse, now the longest in U.S. history, is eroding business and consumer confidence, with critical sectors like aerospace, defense, and travel experiencing substantial disruptions.

Economic Toll Mounts

Former White House economist Kevin Hassett has projected a stark 1.5% contraction in U.S. GDP for the fourth quarter, a direct consequence of the federal government shutdown that began on October 1, 2025. The prediction underscores the severe and accelerating economic damage as Congress remains deadlocked over a funding bill.

According to people familiar with preliminary CBO analyses, the shutdown is currently siphoning roughly $15 billion from economic output each week. This massive weekly drain is compounding, with the total cost projected to reach at least $7 billion by the end of 2026, even after a resolution is found. "The direct impacts are clear in the furloughed federal workforce and stalled services, but the secondary effects on consumer sentiment and business investment are what will truly drive the GDP figure down," Hassett was reported to have told colleagues.

Sectoral Strains and Political Impasse

Beyond the macroeconomic figures, the shutdown's tentacles are reaching deep into the industrial fabric. Companies in the aerospace and defense sectors are reporting delays in contract awards and regulatory approvals, forcing some to consider temporary layoffs. Travel and tourism, heavily reliant on federal personnel and infrastructure, are also facing headwinds.

Efforts to restructure a deal have repeatedly hit a snag, with the political climate described by aides as "exceptionally tense." The impasse centers on disputes over funding priorities, including demands for expanded healthcare and benefits pitted against proposals for leaner budgets. A staffer for a key Senate committee, who asked not to be named due to the sensitivity of the negotiations, said that "lines of communication remain open, but the gaps are significant."

Without a deal, the economic situation is expected to deteriorate rapidly. The CBO and private sector economists warn that the longer the shutdown persists, the greater the risk of more permanent damage to public trust and the nation's economic vitality. Attempts to reach Hassett for further comment were unsuccessful.