Shutdown has cost U.S. billions
WASHINGTON — Containers of goods idling at ports. Reduced sales at sandwich shops in downtown Washington. Canceled vacations to the capital and to destinations abroad. Slashed corporate earnings forecasts. Higher interest payments on short-term debt.
Even with the shutdown of the U.S. government and the threat of a default coming to an end, the cost of Congress’ gridlock has run well into the billions, economists estimate. And the total will continue to grow even after the shutdown ends, partly because of uncertainty about whether lawmakers might reach another deadlock early next year.
A complete accounting will take months once the government reopens and the Treasury resumes adding to the country’s debt. But economists said the intransigence of House Republicans would take a bite out of fourth-quarter growth, which will affect employment, business earnings and borrowing costs. The ripple from Washington will be felt around the globe.
“We saw huge effects during the summer of 2011, with consumer confidence hitting a 31-year low in August and third-quarter GDP growing just 1.4 percent,” said Beth Ann Bovino, the chief U.S. economist at Standard & Poor’s, referring to earlier brinksmanship over the debt ceiling. “Given that this round of debt ceiling negotiations” took place during a shutdown, she said, “the impact on the economy could be even more severe.”
Economists say the shutdown and near breach of the debt ceiling would be unlikely to derail the recovery, now that Congress resolved the impasse late Wednesday. In the weeks after the government reopens, there should be a modest rebound as employees spend their paychecks for the days they were on furlough and the government rushes to process backlogged orders. Still, many businesses might not recover all of the money they would have made had the government operated normally, said Shai Akabas of the Bipartisan Policy Center, a research group based in Washington.
The shutdown has trimmed about 0.3 percent from fourth-quarter growth, or about $12 billion, the forecasting firm Macroeconomic Advisers, based in St. Louis, recently estimated. Standard & Poor’s is more pessimistic, estimating that the shutdown will cut about 0.6 percent off inflation-adjusted gross domestic product, equivalent to $24 billion. Most analysts are predicting that growth will remain subpar, probably running at an annual pace of 2 percent or less.
“Even with a deal to avoid a default, the damage has been done by the fact that we have had a debate questioning whether the U.S. will pay back its debt,” Laurence D. Fink, chief executive of the money manager BlackRock, said Wednesday.
While this fiscal impasse may be ending, many on Wall Street fear Washington is not done.
“Then we can come back some time in December, January and February,” said Brian Gardner of Keefe, Bruyette & Woods, a New York investment bank, “and do this all over again.”