10/18/2013 7:30 PM ET|
How the government shutdown shook up the US economy
Analysts say the hit to gross domestic product from lost government services alone totals $3.1 billion.
Though Congress finally put an end to the 16-day government shutdown late Wednesday night, economists say the standoff has drained billions of dollars from the U.S. economy, with effects extending across a number of industries beyond the federal government itself.
The shutdown forced hundreds of thousands of federal employees and contractors out of work, put government contracts on hold, shuttered national parks and museums and left businesses with fewer customers and lower sales. It's too early to know the final cost of those and other effects, but analysts at IHS Global Insight said the hit to gross domestic product from lost government services alone totals $3.1 billion.
There will also be some impact from lost private-sector jobs tied to the shutdown, as well as a loss of consumer and business confidence resulting from the debt-ceiling showdown," IHS economists wrote in an analysis released to the media. "The exact impact on the rest of the economy will be hard to measure until delayed economic data are released."
Even before that data becomes available, analysts at Standard & Poor's estimated that the shutdown cost $24 billion (or $1.5 billion a day) and slowed the country's economic growth rate by an annualized 0.6 percent for the current quarter.
"The bottom line is the government shutdown has hurt the U.S. economy," S&P said in a statement. "In September, we expected 3 percent annualized growth in the fourth quarter because we thought politicians would have learned from 2011 and taken steps to avoid things like a government shutdown and the possibility of a sovereign default. Since our forecast didn't hold, we now have to lower our fourth-quarter growth estimate to closer to 2 percent."
The Washington, D.C. region was hit especially hard. Some local businesses took a major blow since there were fewer tourists and workers shopping and dining out during the shutdown. Pete's Diner on Capitol Hill, a favorite of many members of Congress including House Speaker John Boehner, lost about 80 percent of its usual business, according to MSN. Businesses like that diner, located in communities hit hard by the federal government shutdown, will never be able to make that money back. "While the federal workers will receive their back pay, the missed coffee, burgers and cocktails will not be repurchased upon their return," Jack Ablin, chief investment officer at BMO Private Bank, said in a statement.
But the shutdown's impact was felt well beyond the nation's capital. According to a new survey by International Council of Shopping Centers and Goldman Sachs (GS), about 40 percent of Americans say they had curbed spending as a result of the shutdown. The survey found that low-income consumers were especially likely to say the shutdown affected their behavior. Nearly half of those earning $35,000 or less said they scaled back their spending, versus about a third of respondents making $100,000 or more.
And thanks to congressional gridlock, consumer confidence is at its lowest point in nearly two years according to Bloomberg's monthly consumer confidence index.
"As we head into the holiday shopping season, retailers and consumers need stability and certainty from policymakers in Washington and assurance that the economy will not implode due to their actions or more important, lack thereof. This new norm of legislating from crisis to crisis is no way to govern," Matthew Shay, the president and CEO of the National Retail Federation, said in a statement. "When consumers cut back their spending, it threatens jobs in every industry. If it's bad for retail, it's bad for the economy, and ultimately the biggest losers are American taxpayers."
Some larger companies have already cited the standoff as a reason for scaling back their earnings forecasts. Stanley Black & Decker (SWK) cut its fiscal year outlook on Wednesday morning, just hours before a deal was reached in the Senate. It said that growth would be weaker in part due to "macro issues affecting emerging markets and the U.S. government budget impasse."
Similarly, microchip designer Linear Technology (LLTC) revised its outlook this week as prospects in Washington looked grim. "Business in the United States may be impacted by the current budgeting stalemate at the federal government level," CEO Lothar Maier said in a release. "Accordingly, we are forecasting revenue for our second quarter to be flat to down 4 percent from the first quarter of fiscal 2014."
If the shutdown made conditions less certain for businesses, it also made it impossible for the officials at the Federal Reserve to monitor key economic data as they look to decide when to pull back on their $85 billion a month in bond purchases. "The data available in September were inconclusive, and since then, incoming information has been silenced with the federal government shutdown," Charles Evans, president of the Federal Reserve Bank of Chicago, said in a speech Thursday. Evans reportedly added that the Fed would likely need "a couple of meetings" to gauge the effects of the shutdown.
Analysts are worried that the damage to consumer and business confidence won't heal right away, in part because Wednesday night's eleventh hour deal sets up the possibility of more fiscal policy gridlock early next year. The agreement only extended federal funding until Jan. 15 and lifted the debt limit until Feb. 7."We have crisis after crisis after crisis and it has a corrosive impact on the economy," Greg Valliere, an analyst with Potomac Research Group, told Reuters. "If you're a business, how do you make plans in this environment?"
More from The Fiscal Times
VIDEO ON MSN MONEY
I would gain control of the most powerful nation in the world;
I would delude their minds into thinking that they had come from man's effort, instead of God's blessings;
I would promote an attitude of loving things and using people, instead of the other way around;
I would dupe entire states into relying on gambling for their state revenue;
I would convince people that character is not an issue when it comes to leadership;
I would make it legal to take the life of unborn babies;
I would make it socially acceptable to take one's own life, and invent machines to make it convenient;
I would cheapen human life as much as possible so that the life of animals are valued more than human beings;
I would take God out of the schools, where even the mention of His name was grounds for a lawsuit;
I would come up with drugs that sedate the mind and target the young, and I would get sports heroes to advertise them;
I would get control of the media, so that every night I could pollute the mind of every family member for my agenda;
I would attack the family, the backbone of any nation.
I would make divorce acceptable and easy, even fashionable. If the family crumbles, so does the nation;
I would compel people to express their most depraved fantasies on canvas and movie screens, and I would call it art;
I would convince the world that people are born homosexuals, and that their lifestyles should be accepted and marveled;
I would convince the people that right and wrong are determined by a few who call themselves authorities and refer to their agenda as politically correct;
I would persuade people that the church is irrelevant and out of date, and the Bible is for the naive;
I would dull the minds of Christians, and make them believe that prayer is not important, and that faithfulness and obedience are optional;
I guess I would leave things pretty much the way they are.
6. No lobbyists: During the 2008 presidential campaign, Obama said: “We have the chance to tell all those corporate lobbyists that the days of them setting the agenda in Washington are over. … I don’t take a dime of their money, and when I am President, they won’t find a job in my White House.” At least a dozen former lobbyists got top jobs in his administration at the beginning of his presidency, according to Politico, and National Public Radio reported the Obama administration was granting waivers to lobbyists to circumvent the ban.
7. Foreign money in campaigns: During his 2010 State of the Union address, and again during the 2010 midterm elections, Obama railed against foreign money influencing U.S. elections. The only problem was that there was no evidence to support the charge or, as Supreme Court Justice Samuel Alito, in the State of the Union audience, silently mouthed, “Not true.”
8. Arizona immigration law: During the battle over Arizona’s immigration law, President Obama said: “Now suddenly if you don’t have your papers and you took your kid out to get ice cream, you can be harassed, that’s something that could potentially happen.” Uh, actually, Mr. President, it couldn’t. The law would allow law enforcement officials to inquire about immigration status only when there is suspicion of a crime being committed.
9. Transparency: Obama pledged that transparency would be a top priority, but his administration refused to grant one-third of the Freedom of Information Act requests, according to an Associated Press analysis. He also was dishonest about transparency when he said that health-care negotiations would be televised on C-SPAN and that he would wait five days to sign a bill so people would have a chance to read it online.
10. Constitutional oath: During his January 2009 inauguration, Barack Obama pledged to “preserve, protect and defend the Constitution of the United States,” yet he has consistently ignored the 10th Amendment giving powers not enumerated in the Constitution to the states. Exhibit No. 1: ObamaCare.
If a small hiccup can cause this much grief in the economy, then maybe people will start to understand that the economy was in terrible shape to begin with. Obama's policies aren't working, but once again, everything else will be blamed.
The ship has been taking on water for quite awhile and the solution that they came up with................
put buckets of water on board?
Washington DC logic...................watch your wallet SUCKERS!!!!
1. Americans want higher taxes: During the debate over raising the debt ceiling, President Obama said that 80% of Americans support including higher taxes as part of the deal. But a Rasmussen poll taken the same week showed that only 34% believe a tax hike should be included in a debt-ceiling agreement.
2. Mother denied health insurance: During his presidential campaign, Obama said that his mother died of cancer after being denied coverage for a preexisting condition. He used her image in a campaign ad, repeated the claim in debates, and used the same rhetoric as President when he tried to sell ObamaCare to the American people. But a new book by New York Times reporter Janny Scott says that Obama’s mother, Ann Dunham, had health insurance through her employer and was only denied disability insurance.
3. Tax restraint for middle and lower class: Obama pledged during his campaign and throughout his presidency not to raise taxes on families making less than $250,000. But ObamaCare’s individual mandate will hit many under the $250,000 mark. (Obama’s own Justice Department said the mandate was a tax, not a penalty, when it argued its constitutionality.) Not to mention a higher federal cigarette tax and countless other “fees” in the health care law that hit the middle and lower class.
4. Shovel-ready jobs: When Obama was selling his $787 billion stimulus package, he consistently bragged about how shovel-ready construction jobs would be funded across the nation. Even the President later admitted that was a lie, when he told the New York Times: “There’s no such thing as shovel-ready projects.”
5. Keep your doctor: President Obama repeatedly pledged that under his health care measure, Americans would be able to keep their doctors. However, with rising costs, many employers will dump their health care plans and force workers into the state health care exchanges (unless you belong to one of the unions getting ObamaCare waivers.) A survey by McKinsey & Company found that more than 30% of companies will discontinue coverage for their workers.
"How The Government Shutdown Shook The U. S. Economy" article if you notice was never signed by the author so we dont know who he is or can never laugh at him
Get used to it because in three short years the national debt will get over 20 trillion if Mr Obama gets his way and looks like he will, and once the 20 T or 110% our GDP gets breached the creditor will be calling our debt by not lending us anymore and demanding a higher interest, our country's economy will stops on its tracks when the 10 year bond reaches 4%, the whole gubmen'st welfare state and economy will collapse under its own weight.
Don't believe me? You only need to spend a month living in a third world country to understand and realize that we and our future generation are slaves to the banks and foreign governments.
Debt is slavery folks, be prepared...............
Unlike certain groups, I have no Problem calling out either side. Let's start with the ACA and the cost overruns building the site. It's simply outrageous. When initial costs estimates triple yet the final Product doesn't work, there should be accountability. However there rarely is, regardless of Party. How certain folks can dig their heels deep in the entitlement system for the Wealthy via the Government is simply unsustainable. Cost estimates for the site went from just over $90million to almost now $300million and growing.
But wait, it's not like this isn't rampant throughout State, Local, and Federal entities because it is. Each and every poster knows on a local level just how bad this is. The Scale just grows once you reach the Federal Level. Of course, the biggest abusers, Defense Contractors. In 2004, the Army squandered away $7Billion on the next generation Comanche Helicopter which it canceled. It then sunk millions before also canceling the next one. The new Joint Jet Fighter, costs have literally Doubled to $137Million per plane. If you think the ACA ongoing cost overruns are bad, those bad deals pale to ongoing corrupt Defense contractors deals.
So in spite of rising Population and the FACT that costs continually go up, the biggest problem is that of corruption. You never hear any posters asking for a pay decrease and or loss of Benefits. Neither will anyone else. However, if we simply address the issues of Family and Friends corrupt deals with State, Local, and Federal Entities, a huge part of Overspending will be addressed. That by far is why the National debt is Out of Control, too many Family and Friends backroom deals for the Already Wealthy.
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