The economic impact of the US shutdown.

After the congress failed to vote the federal budget (a failure mainly caused by the disagreements regarding the ObamaCare and its funding), the U.S. government shut down this year for the first time since 1996, leading to a temporary halt of its services from October 1 through 16.
During this period, although essential services such as the pension payment process were to be maintained, some 800,000 federal workers were unpaid, administrations having been removed.

At the end of this shutdown, even though the relief was predominant among the U.S. population, one main concern is still on everyone’s mind: what will  the consequences on the economy of the country be?

Short-term and long-term impacts have to be considered regarding the matter. The United States may have avoided complete economic chaos by reaching an agreement among congressmen and re-opening the government, yet side-effects are already observable.

According to an initial analysis from Standard & Poor’s, the American financial services company, the 16-day government shutdown has cost the U.S. economy around $24 billion, shaving at least 0.6% off of annualized fourth-quarter 2013 GDP growth (United Press International, 2013). This substantial loss has led to another date of maturity, even more important for the United States. Indeed, Jack Lew, the 76th and current United States Secretary of the Treasury reported that the legal debt ceiling fixed at $16,700 billions was to be reached in October 17. He also insisted on the fact that both Republicans and Democrats needed to compromise about the raising of this debt ceiling in order to dodge a non-payment issue that would send a poor image to the markets (Le Monde, 2013).
Other “minor” short-term effects have been observed as well at the end of the shutdown. Among this list can be highlighted the closed national parks that have affected the tourism industry or the drop in the creation of employment opportunities, estimations showing that some 120,000 jobs that were to be created haven’t been because of the shutdown (lalibre.be, 2013).

The dramatic part here is that these short-term effects are going to lead to long-term ones that will affect the U.S economy for a long time.

Two main long-term effects will be observed in the months to come, even in the years to come.
First, this crisis, by leading to major economic losses, in particular in the field of employment opportunities, will have a dramatic effect on the purchasing power of the average American citizen. This feebleness of the citizen regarding purchases is going to be accentuated by the fact that most of the population does not trust politicians anymore and does not think they are able to deal with the issues that is facing the country.

 

However, one good aspect that will have positive long-term effects can be noticed about this shutdown. It is the fact that Barack Obama did not step back concerning his Obamacare commitments (Le Monde, 2013), reaffirming its strong leadership and offering hope to the citizens that look forward to benefiting from the program.

In conclusion, it has been said that Obama came out the winner of this shutdown. But after having given a look at the disastrous economic impacts that this shutdown has had and will have on the US economy, can we really affirm it was worth it?

Pierre M.