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Government Shutdown 2023: Difference between revisions
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== Economic Consequences == | |||
=== Goldman Sachs === | |||
Unlike the debt limit, where Congress reached a deal because the potential hit to the economy from an impasse would have been so severe, a shutdown would be much more manageable from a macroeconomic perspective,” Goldman Sachs Chief U.S. Political Economist Alec Phillips writes in the team’s report. “However, compared to the debt limit, the less severe economic effect of a shutdown also makes it more likely that Congress fails to act in time.”<ref>https://www.goldmansachs.com/intelligence/pages/the-cost-of-a-us-government-shutdown.html</ref> | |||
A government-wide shutdown '''would directly reduce growth by around 0.15 percentage point for each week it lasted, or about 0.2 percentage point per week once private sector effects were included''', and growth would rise by the same cumulative amount in the quarter following reopening, | |||
While federal spending is equal to almost a quarter of gross domestic product, the impact of a shutdown is much smaller, for four reasons: | |||
# Only discretionary spending would be affected, about a quarter of federal outlays, because mandatory spending (on programs like Medicare and Social Security) runs automatically subject to rules Congress has established. | |||
# Only departments that Congress has not funded would shut down. | |||
# Shutdowns primarily affect the work of federal employees (federal pay amounts to roughly 2% of GDP), with little impact on investment or purchases of goods and services. | |||
# The majority of federal employees, roughly 65%, would continue working during a shutdown because the services they provide are likely to be deemed essential. | |||
Markets have not reacted strongly to past shutdowns, according to Goldman Sachs Research. '''At the close of the three prolonged shutdowns since the early 1990s, equity markets finished flat or up even after dipping initially'''. The dollar weakened slightly after prior shutdowns began and the 10-year Treasury yield generally declined | |||