Director of National Intelligence James Clapper told a Senate panel that an estimated 70% of intelligence workers had been placed on unpaid leave.
Also, the head of the US electronic spy agency said morale had been devastated.
The US government closed non-essential operations on Tuesday after Congress failed to reach a new budget deal.
James Clapper appeared before a Senate judiciary committee hearing on Wednesday, warning lawmakers the damage to US intelligence capabilities caused by a shutdown would be “insidious”.
“This is not just a Beltway issue,” he said, referring to the Washington DC area.
“This affects our global capability to support the military, to support diplomacy, and to support our policymakers.”
James Clapper also warned that foregoing paying employees during the shutdown could cause them financial hardship, making them inviting targets for foreign spies.
“This is a dreamland for foreign intelligence services,” he said.
General Keith Alexander, director of the National Security Agency (NSA), said the electronic spying agency had placed thousands of mathematicians and computer scientists on unpaid leave.
“Our nation needs people like this,” he said.
“And the way we treat them is to tell them, <<you need to go home because we can’t afford to pay you, we can’t make a deal here>>.”
The government shutdown has left more than 700,000 employees on unpaid leave, and closed national parks, tourist sites, government websites, office buildings and more.
It came after weeks of wrangling between Democrats in the White House and Senate and the Republicans who control the US House of Representatives.
House Republicans have demanded repeal, defunding or delay of a healthcare law passed in 2010 by the Democrats as a condition for continuing to fund the government. President Barack Obama and the Democrats have refused, leading to the current morass.
The spy chiefs’ remarks came after the White House announced Barack Obama would cut short a planned four-nation tour of Asia next week.
President Barack Obama will attend regional summits in Indonesia and Brunei, but skip Malaysia and the Philippines due to the government shutdown.
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