Isn't anyone here worried about what a government shutdown will do to the Markets?
NEW YORK -- Political infighting in Washington may seem irrelevant to many Americans. But in the coming weeks, as Congress attempts to pass a budget and debates whether to increase the federal debt limit, these rivalries now have the potential to devastate the U.S. economy.
If lawmakers don't reach an agreement to fund the government by Friday, an array of programs will shut down. The freeze, if it lasts for several weeks, could wound Americans' confidence enough to tip the economy into recession, Mark Zandi, chief economist of Moody's Analytics, said last week.
But even that scenario wouldn't be as damaging as if the government defaulted on its debt, a consequence that could come sometime in the next several months if lawmakers, locked in a political stalemate, fail to increase the federal debt limit.
A government shutdown has the potential to cause a recession if it lasts long enough, experts say. A default would likely ravage the economy almost immediately. Both could be caused by gridlock in Congress.
"It would be a big, big, big deal" if the United States defaulted on its debt, said Nariman Behravesh, chief economist at IHS Global Insight, a financial and economic analysis firm. "It could mean the collapse of the dollar. People would run away from the U.S."
"That's playing with fire," he added.
At stake is the ability of the United States government -- and indeed of all of its citizens -- to borrow money cheaply, something Americans have long taken for granted as an essential feature of their first-world economy. If interest rates rise high enough, the economy essentially grinds to a halt.
"People playing chicken think it's a good idea to put at risk something that the country paid a dear price to preserve for so many years," said Gary Burtless, a former Labor Department economist and a current fellow at the Brookings Institution, in Washington. "For a rich country to play these types of games does strike me as being foolish in the extreme."
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