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| The White House may have to close on October 1. (Source: Tripadvisor) |
Huge political conflicts in the US Congress are preventing the parties from reaching an agreement. Disagreements over budget cuts, aid to Ukraine and the immigration situation at the border with Mexico are huge obstacles.
The House has so far passed four of 12 budget bills, including one on military construction and veterans affairs in July. The Senate has yet to pass any, suggesting that both sides have much work to do and time is running out.
Moreover, the bills passed by the House of Representatives include many right-wing priorities and are much lower in spending than the Senate proposed, as well as the level agreed upon by the bipartisan debt ceiling deal reached in mid-year. Therefore, these bills are expected to face strong opposition from Democrats in the Senate and have difficulty passing.
However, in the United States, federal government shutdowns have become common in recent years. In the past three decades, there have been seven US government shutdowns: 1990 - under President George HW Bush; lasted 4 days. 1995 - under President Bill Clinton; lasted 5 days. 1996 - under President Bill Clinton; lasted 21 days. 2013 - under President Barack Obama; lasted 17 days. 2018 (2 times) - under President Donald Trump; lasted 3 days and in a few hours. 2019 - under President Donald Trump; lasted 35 days. |
Wall Street and Biden administration economists have calculated that a short-term government shutdown would be unlikely to slow the US economy or push it into recession.
However, a prolonged shutdown is different, said Gregory Daco, chief economist at EY-Parthenon, who said the US government shutdown would not be “a game changer in terms of economic dynamics.” However, “the concern is that if this were combined with other “headwinds,” it could become a significant drag on economic activity.”
On September 29, White House economic adviser Lael Brainard said the possibility of a US government shutdown this weekend is an “unnecessary risk” for a resilient economy with moderate inflation.
Speaking to CNBC, Ms. Brainard emphasized that avoiding a government budget deficit "is entirely in the hands of the House of Representatives, especially House Republicans" and that risks to the economy include active-duty troops not being paid, delays in air traffic and poor Americans not being able to access government assistance.
Ms. Brainard cited U.S. Commerce Department data showing that in August, annual core inflation, excluding food and energy, fell below 4% for the first time in more than two years.
She said this was “good news” for the economy, adding: “We’ve seen continued job creation and core inflation has fallen to levels we saw before the pandemic.”
The White House economic adviser stressed that a US government shutdown would hurt workers who provide “essential services to the American people without pay.” She noted: “It is a completely unnecessary risk to an economy that has proven to be very resilient.”
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