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If President Trump follows through on his promise and shuts down the government to force Congress to build a wall along the Mexican border, his controversial pet project could end up costing ten times more than current estimates, in real terms.
Here's why: In the past 18 federal government shutdowns since 1976, the stock market has lost 0.6% of its value, on average, according to an analysis by LPL financial. (In the handful of occasions in which Washington was shut down despite being controlled by a single political party, stocks fell more than 2% on average).
A 0.6% loss may not sound like much, but given that the total U.S. market is now worth around $25 trillion, that works out to a loss of $150 billion in real wealth.
Now, add to that what a shutdown could cost the actual economy.
The last time the government was forced to close — in 2013, when a divided Congress could not agree with then-President Obama on a budget due to battles over Obamacare funding — the showdown cost the domestic economy $24 billion and reduced that quarter's GDP growth by more than half of a percentage point, according to Standard & Poor's.
Next, factor in the cost of actually building the wall.
Earlier this year, the U.S. Department of Homeland Security estimated that erecting a system of walls and fences along the entire U.S.-Mexico border would require $21.6 billion.
A separate report prepared by Democrats on the Senate Homeland Security and Governmental Affairs Committee concluded that this estimate was too low — and that it could cost nearly $70 billion to construct such a wall and then would require $150 million annually to maintain it.
But even taking the more conservative figure, construction costs plus economic and market-related costs tied to a government shutdown would work out to nearly $200 billion, not the $21.6 billion cost according to Homeland Security.