Federal government shutdowns have become so common in recent years that forecasters have a good read on how another one would affect the American economy. The answer is fairly simple: The longer a shutdown lasts, the more damage it is likely to inflict.
A brief shutdown would be unlikely to slow the economy significantly or push it into recession, economists on Wall Street and inside the Biden administration have concluded. That assessment is based in part on the evidence from prior episodes where Congress stopped funding many government operations.
But a prolonged shutdown could hurt growth and potentially President Biden’s re-election prospects. It would join a series of other factors that are expected to weigh on the economy in the final months of this year, including high interest rates, the restart of federal student loan payments next month and a potentially lengthy United Automobile Workers strike.
A halt to federal government business would not just dent growth. It would further dampen the mood of consumers, whose confidence slumped in September for the second straight month amid rising gas prices. In the month that previous shutdowns began, the Conference Board’s measure of consumer confidence slid by an average of seven points, Goldman Sachs economists noted recently, although much of that decline reversed in the month after a reopening.
“There’s a reason shutdowns tend to be pretty short. They end up causing disruptions that people don’t like.”
New from @nytimes, Equitable Growth’s Senior Policy Fellow @MichaelSLinden on the potential government shutdown. 👇https://t.co/etQF4cRgyh— Equitable Growth (@equitablegrowth) September 27, 2023