Breaching the nation's borrowing limit and defaulting on debt would be unprecedented and pose the graver economic risk, as it could drive up U.S. borrowing costs and tarnish the nation's credit rating in the long run. The fight alone could roil financial markets as it did starting in late July 2011, when a standoff triggered Standard & Poor's to downgrade the nation's triple-A credit rating, contributing to a 16% decline in the Dow Jones Industrial Average in the months that followed.
Most observers think a default this time is likely to be averted, as it was two years ago, by an 11th-hour deal. Still, Flack Steel's business took a hit from all three crises in 2011 and 2012. "You can watch our earnings evaporate three months after each event," Flack said. "Our customers start pulling back their business" in the weeks around every fiscal deadline in Washington.
The steel industry already is suffering from high raw-material prices and a glut of steel on the world market, among other things. Some steel executives had been hoping the U.S. government would order up new steel-intensive infrastructure projects, something that seems increasingly unlikely. Sales to companies for highway construction and infrastructure projects have been "like a yo-yo," Flack said, with discord in Washington disrupting supply cycles and telescoping outlooks to a few months from a few years. Customers that once took the long view "have become very shortsighted" and reluctant to commit capital, he said.
After the fiscal-cliff standoff, business spending as a share of the economy fell 4.6% in the first quarter of 2013 from the previous quarter.
Similar caution is evident nationwide today. A Moody's Analytics gauge of uncertainty over government policy is on the rise, similar to surges during previous budget battles. The measure is based on credit-default swaps on U.S. Treasury debt, aspects of certain tax provisions and surveys of businesses about their regulatory concerns.
In August, one benchmark of economic confidence registered its first decline in six months. The Equipment Leasing and Finance Association's index of new business was down 11% from July and 7% from August 2012.
The drop in the index, which measures leasing and financing activity for commercial equipment used in technology, health care, energy and other sectors, is due to waning confidence, said Adam Warner, president of Key Equipment Finance, the Colorado-based arm of financial-services firm KeyCorp.
Instead of stepping up their leasing, businesses are postponing commitments. "They are thinking, 'Let's push this off and see what's going to happen. Is the economy going into a tailspin because of a possible government shutdown?'" Warner said.
Such retrenchment ripples through the broader economy and can be a bellwether for the labor market. "When a business is acquiring equipment, chances are you are going to be hiring someone to operate that equipment," Warner said. "When we see a fall in that activity, typically there is going to be less employment."
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What recovery, the false economy that is being propped up by the billions the fed are printing?
There is no recovery and one was never planned. Obama wants to tank to the economy to get as many people hooked on the government dole as possible to keep Democrats in power.
LOL ........... DERAILING THE EMPERORS NEW CLOTHES!
There never was a recovery, at least not for most Americans.
The threat of a shutdown won't be the reason our economy continues to struggle, the biggest reason for our anemic recovery is the combination of Obama, Liberals and most especially, Obamacare.
Exactly how would one tell if this "recovery" had been derailed? The only barometer that says it is a recovery is the stock market so "big whoop". Let it derail. From where I sit there will be no difference.
I'd rather see the country get back to reality and get away from these manufactured bubbles that give the appearance of success but inevitably pop.
In the meantime, all the big boys that have eyes and ears in the Congressional meeting rooms will be trading like bandits. This situation is great for those guys. They love volatility and they make money on the way up and down. All this theater is just a chance to churn the market.
Any drops during the shutdown will be regained immediately when they inevitably reach an agreement. There's simply too much money in the system with nowhere else to go!
Uhhh, what budget? What recovery? We haven't had a budget in 5 years. I HAVE however seen a bunch of spending bills passed.
I guess the "plan" is to borrow our way out of debt. Brilliant!
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