The Globe and Mail reports in its Thursday edition that federal government shutdowns are so common now that forecasters can read how another one would affect the U.S. economy. A New York Times dispatch to The Globe reports that the answer is 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. However, a prolonged shutdown could hurt growth and potentially President Joe 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. 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.
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