In the grand scheme of the $16 trillion U.S. economy, the nearly three-week government shutdown and standoff over the debt ceiling may not look like much. Analysts estimate the loss at tens of billions of dollars, and reckon that much of that will be recouped in the next quarter.
But the extent of the economic harm goes well beyond what can be immediately tallied: lost business deals and disrupted research; a hit to consumer confidence; and what many see as permanent damage to U.S. credibility globally.
These setbacks may prove to be far more costly, lasting and painful than a few months’ worth of slower growth.
“It’s not that this episode causes lasting damage; it’s the succession of episodes,” said Peter Morici, a University of Maryland business professor, referring to federal lawmakers’ repeated down-to-the-wire fights over the budget.
The end to the shutdown Thursday caused a scramble to restart government services and programs in the hopes of mitigating any long-term consequences, particularly for government-funded scientific research.
In one high-profile case, the National Science Foundation said it would resume its halted studies in Antarctica. But Ross Powell, the scientist in charge of one project there researching the environment below the ice, said he wasn’t sure whether his team could salvage some of the planned work. It may take weeks or months to get a clear assessment of the status of various projects, but it’s almost certain that some data and work will be lost for good, given the importance of continuity in scientific research.
The picture is similarly murky for the nation’s economy, as businesses and workers alike adjust to a new and elevated level of doubt. The Federal Reserve’s report on the economy last week repeatedly cited uncertainty as a factor holding back investments and hiring in the past two months.
Some analysts had been expecting job growth to accelerate to 175,000 a month in this final quarter. Now they’re not so sure. Many economists have slashed economic growth forecasts for the fourth quarter, and it remains to be seen how quickly activity will bounce back.
Although this latest crisis was resolved at the last minute, the fact that another threat looms in less than three months could cause businesses and consumers to be more cautious..