Pending Tea Party Putsch Poleaxes Paychecks

Pending Tea Party Putsch Poleaxes Paychecks

“A federal shutdown would be bad news for some corners of Main Street. That’s because the federal government relies more and more on a wide network of private-sector contractors for goods and services that total as much as $300 billion a year. If Congress fails to pass a budget deal by next Tuesday, millions of people whose jobs depend on the government operating may not be paid.”

—“How government shutdown would hurt Main Street,” Jennifer Liberto, CNN Money

“If the federal government shuts down … the economic impact would be small at first but grow quickly.

A partial shutdown would cut the economy’s annual growth rate in the fourth quarter by 0.2 percentage points, to 2.5%, even if it ended in three or four days, Moody’s Analytics chief economist Mark Zandi told the Senate Budget Committee Tuesday.

A three-to-four week impasse could reduce growth by 1.4 percentage points — effectively cutting the economy’s expected growth rate by half or more. About half of civilian government workers wouldn’t be able to go to work, and their lost pay would represent about half of the short-term economic impact, Zandi estimated.

‘Shutting the government down for three or four weeks would do significant economic damage,” Zandi said. “Any interruption longer than a month would cause GDP to fall for the quarter, and one longer than two months would likely precipitate another recession.”’

— “If government shuts down, economy would feel it,” Tim Mullaney, USA Today

“The impact of a brief shutdown – or even just the threat of one – for government contractors can also mean higher costs for federal agencies in the future, although it’s almost impossible to assign a dollar amount, says Roy Meyers, a political science professor at the University of Maryland Baltimore County and a former CBO analyst.

‘It can reduce the profits of the contractors,’ says Meyers. ‘And the next time they consider working with the federal government, they count that as a risk, and they charge more.'”

— “Why a government shutdown could be a pricey proposition,” Carrie Dann, NBC News

“For investors, the chief fear is that a government shutdown would set the stage for a more momentous battle over the so-called debt ceiling. If there is no agreement to raise the borrowing limit by mid-October, the government will not be able to issue more bonds and could default on its outstanding borrowing.”

— “Wall Street Uneasy in Face of Government Shutdown,” Nathaniel Popper, New York Times blog

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Image (“Healthcare USA, after Anton Bruehl“) by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, NotionsCapital.com

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