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Government shutdown would have minimal impact on economy: study

A new study suggests a shutdown of the federal government would not have the severe economic impacts that some Democrats have warned about.

A government shutdown would have minimal impact on the economy, a new study suggests, even as the White House issues dire warnings of financial turmoil.

Lawmakers have until Sept. 30 to reach some sort of deal to fund the government or risk a partial shutdown.

"Unlike the debt limit, where Congress reached a deal because the potential hit to the economy from an impasse would have been so severe, a shutdown would be much more manageable from a macroeconomic perspective," Goldman Sachs Chief U.S. Political Economist Alec Phillips said in a new report this month. 

"However, compared to the debt limit, the less severe economic effect of a shutdown also makes it more likely that Congress fails to act in time."

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The minimal negative impact would also be made up for in the next financial quarter, the study said. 

It pointed out that only part of the government’s financial priorities would be affected, and programs like Medicare and Social Security would stay active. 

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A majority of the federal workforce would also remain on the job — about 65% of government employees, according to Goldman Sachs. 

"Markets have not reacted strongly to past shutdowns," the financial giant’s research suggested. 

It comes as Democrats in the Senate and White House have sought to preemptively shift blame for any looming shutdown to House Republicans. 

The House and Senate are still far apart on government funding goals for fiscal year 2024. The Senate is working on appropriations bills at the levels set by the debt limit deal struck between President Biden and Speaker McCarthy, roughly freezing spending at this year’s top lines. 

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But McCarthy has pledged to pass spending bills at levels even lower than that, as demanded by conservatives in his conference. 

White House deputy press secretary Andrew Bates issued a statement earlier this week warning of the consequences of a partial government shutdown. 

"House Republicans have a stark choice to make: Will they honor their word, meet their responsibility to avoid a shutdown and act on life and death priorities like fighting the fentanyl crisis?" Bates said.

"Or will they break their promise and choose to shut down the government — hurting our economy, undermining our disaster preparedness and forcing our troops to work without getting their paychecks — all to appease Marjorie Taylor Greene and her far-right friends’ demands for a baseless impeachment stunt simply to politically attack the president?"

Republican Study Committee Chair Rep. Kevin Hern, R-Okla., hit back at the White House and accused Democrats of "politicizing" the government spending debate.

"Our spending crisis isn’t new," Hern said. "Federal deficits have been growing at exponential rates for years. Republicans have been talking about cutting spending since the moment we won back the House, but more people tend to pay attention around these highly politicized inflection points. The goal has never been to shut down the government; the goal is to put our country on a fiscally-sustainable path."

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