Once again, the maxim ‘time is money’ fits. It’s been nine days that the American government has been partly shut down; there is still no sign of a finishing line, no budget for 2014 appears close to being decided. Until the President and Republicans sit down for serious talk, Americans will continue to go without non-essential public services.
Federal employees with their pay cut off and the closure of federally-managed sites are all contributing to reductions in the country’s cash flow.
Steven Ricchiuto, chief economist at Mizuho Securities, said: “What we are really looking at is a temporary drag on the economy as we leave more and more projects and programmes in delay mode, and I think that will start subtracting from people’s GDP numbers.”
How many workers aren’t even allowed to change a light bulb? Around 800,000. That leaves the rest, which is most of them – they total two million – still getting paid. But, according to whose data you read, it could be costing Washington DC alone around 300 million dollars per day in lost business. Some say the political constipation is costing eight billion dollars per week.
When Bill Clinton was president, a 26-day shutdown cost the economy a billion and a half dollars: a fraction of today’s pain, which could see a more than one percent dent in GDP.
There have been 17 shutdowns since 1977. Some only lasted a few hours, most no longer than three days. The federal workers under the first Clinton administration finally started getting paid again, with backlog, after the budget vote. This time, it’s not guaranteed; under the rules, that’s in the hands of Congress.
The shutdown has directly hit tourism receipts. Tourism lost big in 1995, not only because sites were closed but because visas don’t get issued to paying customers.
Household confidence is expected to suffer as well this time, and consumer trends to head downward. Another day, another dollar not in your pocket is that much less purchasing power.
The other dread in Washington is an impasse over raising the ceiling on the national debt – deadline October 17. No deal would mean default – the government not being able to meet its debt obligations in full and on time.
People in powerful places are suggesting worrying things could happen.
Global banker Olivier Blanchard said: “If there was a problem lifting the debt ceiling, it could well be that what is now a recovery would turn into a recession or even worse.”
Blanchard, the chief economist with the International Monetary Fund, talked about that hypothetically.