US Govt shutdown hurts growth, cost economy $24 billion

Updated - November 16, 2021 10:32 pm IST

Published - October 17, 2013 09:20 am IST - Washington

The US Government shutdown, running into more than two weeks now, has cost the American economy more than $24 billion, ratings angecy Standard & Poor’s has said.

“The bottom line is the government shutdown has hurt the US economy,” Standard and Poor’s — the eminent credit rating agency — said in a statement as the US Congress appeared to strike a deal yesterday to resolve the stalemate over a new budget and raising the debt ceiling.

S&P said the impact of the shutdown likely will take 0.6 percentage points off fourth-quarter growth and that would leave annualised growth in the October-December period at close to a sluggish 2 per cent rate.

The rating agency noted that the deal reached tentatively yesterday only funds the government through January 15, and allows the government to keep borrowing funds until February 7.

That means the same economic woes that this most recent fight inflicted will be a threat again in relatively short order, it said warning that consumers could have a hard time regaining their momentum during that relatively short window.

“The short turnaround for politicians to negotiate some sort of lasting deal will likely weigh on consumer confidence, especially among government workers that were furloughed,” S&P said.

“If people are afraid that the government policy brinkmanship will resurface again, and with it the risk of another shutdown or worse, they’ll remain afraid to open up their check books. That points to another Humbug holiday season,” the credit rating agency said.

Earlier in the day, one of its top analyst said the economic impact of debt ceiling and government shutdown could be worse that the 2008 economic collapse.

“It would be worse than Lehman Brothers in my judgement, and I think it’s needless,” S&P analyst John Chambers said.

“We’ll have to see what the government’s response is. Our assumption is that there will be a plan, that’s why we rated AA+ with a stable outlook. However the mere fact that we’re having these discussions led us to conclude two years ago that it simply wasn’t appropriate to have a AAA rating on the US government,” Chambers said.

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