As the September 30th funding deadline approaches, economists at Goldman Sachs have issued a stark warning, estimating a 90% likelihood of a government shutdown in the next three days. In a note to investors, Jan Hatzius, the chief economist and head of global research at Goldman Sachs, outlined the grim prospects of a timely deal being struck to avert the crisis.
The Senate has introduced a 79-page bill aimed at extending government operations until November 17th, in a bid to create a window for broader spending negotiations before the end-of-year deadline. However, experts indicate that this may be a last-ditch effort, with the specter of a shutdown looming ominously.
Should a government shutdown come to pass, Goldman Sachs foresees a protracted reopening process due to entrenched political positions. While a portion of the costs incurred during a shutdown may be recouped in subsequent quarters, the potential losses could still amount to billions. The most dire scenario, a full quarter-long shutdown, could dent fourth-quarter GDP growth by as much as 1.2 percentage points, according to Mark Zandi, chief economist at Moody’s Analytics.
The repercussions of a government shutdown extend far and wide, potentially affecting transportation systems and imperiling the pay of non-essential federal personnel, including military personnel. Airlines have issued warnings of longer security screening lines, increased delays, and disruptions to training and modernization efforts.
In addition, key economic data releases from government agencies are expected to face postponement until the government is back in operation. With each passing day, the likelihood of a deal to prevent a shutdown diminishes. This grim prospect would entail a disruption in vital federal services, potential transportation setbacks, and could potentially deliver a significant blow to the U.S. economy, contingent on the duration of the shutdown.
The nation watches with bated breath as lawmakers grapple with the impending funding deadline, hoping for a resolution that would avert a government shutdown and its far-reaching consequences. The clock is ticking, and the fate of vital federal operations hangs in the balance.
Source: Yahoo Finance
