In just 16 days, the partial shutdown of the US government took $24 billion dollars out of the US economy, forcing economists to change economic projections.
The ratings agency Standard and Poor’s said that it had revised America’s fourth-quarter GDP growth forecast, taking 0.6 per cent off the prediction.
Overall, it said that the shutdown and nervousness over a potential US default would take almost 1 per cent off the annualised growth rate. The agency says that the US economy will now grow two per cent this year, instead of three.
“In the summer of 2011, as we approached the last debt ceiling standoff, consumer confidence plummeted and hit a 31-year low in August when the debt ceiling issue came to a head. Given that this round of debt-ceiling negotiations is occurring after two-plus weeks of a government shutdown, the total impact on the economy will likely be even more severe,” said a statement by the agency.
They continued that a default on US loans would take four per cent of government spending out of the economy immediately.
“The impact of a default by the US government on its debts would be devastating for markets and the economy and worse than the collapse of Lehman Brothers in 2008.
“If people are afraid that the government policy brinkmanship will resurface again, and with it the risk of another shutdown or worse, they’ll remain afraid to open up their chequebooks. That points to another humbug holiday season.”
Earlier today, President Barack Obama praised Senate and Congressional lawmakers for getting a deal done, but said that compromise and negotiation needed to continue.
“The American people are completely fed up with Washington,” he said.
There’s no reason we can’t govern responsibly, without lurching from manufactured crisis to manufactured crisis.
“We come from different parties, but we’re Americans first. We can’t degenerate into hatred.”