Last week, the federal government shut down, with both Republican and Democratic plans to finance ongoing appropriations failing to garner enough votes to pass the Senate.
Donald Trump did not seem overly worried about the situation, calling it an “unprecedented opportunity” to throttle funds going to blue states and fire federal employees. The stock market surged higher and the bond market did not react. But up to 750,000 workers will be furloughed, losing out on $400 million in wages a day. Every week that the government remains closed will cut the annualized GDP growth rate by 0.1 percent this quarter, Mark Zandi of Moody’s Analytics estimates. The White House forecasts that a month-long shutdown would lead to 43,000 Americans losing their job. The economy is already weakening in some important respects. Might this be enough to tip it into a recession?
No, one might say, of course not: GDP is rising at a strong 3.8 percent a year.
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