Hard to say how bad impact of current US govt shutdown will be, Latest Business News - The New Paper

Hard to say how bad impact of current US govt shutdown will be

This article is more than 12 months old

WASHINGTON: The US government shutdown on Saturday became the longest ever and is taking a growing bite out of the world's largest economy with each passing day, economists said.

While most of the 21 "lapses" in government spending since 1976 left barely a scratch on economic growth, the length of this shutdown makes it harder to say how bad the impact could get.

"It's not a hard stretch to say that initially it's smaller and then it expands, the pain starts to widen," said Ms Beth Ann Bovino, chief US economist at S&P Global Ratings. "Think of it as a butterfly effect."

The shutdown is squeezing an estimated US$1.2 billion (S$1.6 billion) a week out of the economy, Ms Bovino said, but that figure could grow if it drags on.

At the current rate, within two weeks it will have cost America more than the US$5.7 billion US President Donald Trump is demanding for a wall on the border with Mexico, the dispute with Congress that led to the failure to pass funding for government operations.

After extended closures in 1995 and 2013, the US economy continued to grow while stock markets mainly went sideways.

But some losses can never be recovered.

In myriad but often unseen ways, the US$4 trillion federal budget is felt in the daily lives of all Americans. Switching off even a part of the government means that life force quickly begins to bleed away.

Payments to farmers and poor families, craft beer labels, food inspections and economic data all have fallen victim to the budget impasse.

Meanwhile, tax refunds and borrower income verifications crucial to the mortgage industry were briefly up in the air with billions at stake.

US Coast Guard cutters, whose crew have been working without pay, have started icebreaking at commercial ports in the waters of Great Lakes so local steel mills can remain supplied with iron ore.

Meanwhile, farmers cannot collect aid payments designed to help ease the pain caused by Mr Trump's trade war with China.

Small Business Administration loans to help small businesses trying to invest, hire and grow have been delayed.

There are no government loans for seeds or cattle feed and none of the regular Agriculture Department data about crop yields and commodity prices that farmers depend on to plan for the coming year.

Permits from some oil and gas drilling - which feeds into GDP calculations - are delayed.

Bloomberg estimates that government contractors are losing US$200 million a day, cutting revenues for defence industry giants like Boeing, General Dynamics and Leidos.

Tourism at the country's 400 national parks normally generates a reported US$18 million a day, but with some parks unattended and many services halted, local restaurants, hotels and shops are losing customers.

Government assistance to feed the poorest Americans is funded through next month only.

None of this includes the hardships felt by the 380,000 federal workers who have been furloughed or the 420,000 who are deemed "essential" but are working without pay.

They owe an estimated US$438 million a month in rent and mortgage payments, according to the real estate firm Zillow. - AFP