US Economy suffers partial shutdown

The United States government shutdown on Saturday became the longest in history and is taking a growing bite out of the world’s largest economy with each passing day, economists say.

While most of the 21 “lapses” in government spending since 1976 left barely a scratch on economic growth, the length of this shutdown makes it harder to say just how bad the impact could get.

According to reports, “It’s not a hard stretch to say that initially it’s smaller and then it expands, the pain starts to widen,” Beth Ann Bovino, chief US economist at S&P Global Ratings, “Think of it as a butterfly effect.”

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With about a quarter of the federal workforce affected, the shutdown is currently squeezing an estimated $1.2 billion a week out of the economy, Bovino said, but that figure could grow if it drags on.

At the current rate, within two weeks it will have cost America more than the $5.7 billion US President Donald Trump is demanding for a wall on the border with Mexico, the dispute with Congress that led to the failure to pass funding for government operations.

Following extended closures in 1995 and 2013, the US economy continued to grow while stock markets mainly went sideways.

And GDP growth lost in one quarter can rebound in the next as the government springs back to life and workers recoup lost salaries. But some losses can never be recovered.

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In myriad but often unseen ways, the $4 trillion federal budget is felt in the daily lives of all Americans, well beyond the 800,000 government workers now going without pay — many of whom missed their first paychecks on Friday.

Switching off even a part of the government means that life force quickly begins to bleed away.

Source: AFP


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