Government shutdown: What's the cost?

Shutting down the government could cost the federal government well over $2 billion dollars if it resembles the last shutdowns in 1995-1996, though the economy would be harmed in additional ways that are nearly impossible to measure.

The Office of Management and Budget estimatedthat two government shutdowns in 1995 and 1996, totaling 27 days, cost the federal government $1.4 billion. That's over $2 billion in today's dollars on costs like back pay to furloughed federal workers and uncollected fines and taxes. That number doesn't begin to account for intangible losses in worker morale and productivity, and confidence in the federal government.

Doug Holtz-Eakin, the former director of the Congressional Budget Office, said a short-term shutdown will have a fairly small economic impact. The federal government spends roughly $3 billion a day in discretionary spending, so a disruption like the ones in 1995 and 1996 could wind up being roughly equivalent to the cost of keeping the government running for a day.

"A short government shutdown is not a very important event; it's a hiccup," Holtz-Eakin said. "I think the bulk of the costs are transitory and are paid back later. That's really what happens. There's some distraction costs that never go away and they're real."

Among those distractions is the amount of time federal managers and human resources employees must spend preparing their shutdown plans. Prior to the 1980s, many agencies would simply continue running if there was a funding gap. That changed with a legal memo from Attorney General Benjamin Civiletti saying government work had to stop, with the exception of certain employees.

That's when those agencies had to start writing plans for a government shutdown - not a full time job, but additional responsibilities on top of their regular work, said John Cooney, a former Office of Management and Budget attorney who helped develop these plans. "They'd have to put aside whatever other functions they had because this one is on an absolute deadline," he said.

These plans went largely untouched between the 1995-1996 government shutdown and the one that nearly took place in 2011, said Cooney. The good news is that some of the planning work that will have gone into this shutdown was done two years ago and is still fresh.

Though Holtz-Eakin maintains that a short shutdown of a few days will have a small effect, a longer one will have bigger effects. "You start to really impact the ability of government employees to spend," he said. That's 800,000 people who won't be getting regular paychecks.