Another Government Shutdown May Be Just Weeks Away – What Damage Could It Do To The Economy?

Another government shutdown may be just weeks away. With just days to go before funding runs out, neither the House nor the Senate are close to passing the necessary funding bills.

The longer a federal government shutdown lasts the more damage our economy faces, economists say. Shutdowns have occurred so frequently in recent years that forecasters have reached a point where they can easily predict how another one could affect the American economy. 

The shorter the shutdown the less likely it is to drastically slow the economy and send it into a recession, according to economists on Wall Street and in the Biden administration. This evaluation comes from the data from past shutdowns.

This extended shutdown presents a possibility of hurting growth especially when it comes to the economy entering a new year as well as a rise in interest rates and the renewal of federal student loan payments. 

The chief economist at EY-Parthenon, Gregory Daco, stated that a shutdown isn’t a “game changer in terms of the trajectory of the economy. The fear is that, if it combines with other headwinds, it could become a significant drag on economic activity.” 

House and Senate leaders have agreed on topline numbers for the budget, but House conservatives are already threatening to boycott the deal, which could doom it altogether.