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Shutdown Ramifications (Part I): America & the World

While the government shutdown is over for now, the calamitous costs to America and the world linger.

The most blatant financial costs have resulted from a major “sucker punch” to the gut of the fragile U.S. economy. This occurred at an inopportune time for America.

Like a boxer absorbing a knock out blow, we were just getting off the ropes of recession and back in the fight for a full fiscal recovery – albeit slowly but surely.

Needless Fiscal Disruption

The shutdown has resulted in a staggering loss of at least $24 billion in economic output, according to the esteemed financial services firm, Standard & Poor’s.

This colossal figure equates to upward of half a percentage point in the quarterly Gross Domestic Product (GDP), says S&P.

As a result, many leading economists have pared down their annual growth forecasts due to this needless and self-inflicted fiscal disruption.

The GDP is now predicted by Wall Street analysts to be closer to an annualized rate of 2% when it should have been closer to 3%.

Global markets are now more skeptical of the U.S. financial stability – and for good reason. According to S&P:

  • “The short turnaround for politicians to negotiate some sort of lasting deal will likely weigh on consumer confidence, especially among government workers that were furloughed.”

Moreover, America’s long-cherished AAA credit rating is at risk because of the fleeting fix to the fiscal mess. At least one major ratings agency, Fitch, has already put us on warning.


In addition to sky-high financial costs, the shutdown and debt crisis have badly weakened America’s global leadership role.

The United States has been embarrassed and ridiculed worldwide due to all the delirious political and financial dysfunction. Some major competitor countries, like China, are lambasting America for propaganda purposes claiming our government is in shambles.

But the communist Chinese government needs to take a look in the mirror. That is, if it’s possible to see through all the thick smut, smog and host of pollutants engulfing major cities — causing severe health risks to countless millions of people.

Nevertheless, a recent scathing editorial appeared in the government run Chinese newspaper, Xinhua, calling for a “new world order” in which the dollar is replaced as the global reserve currency.

The editorial captured world-wide attention with the blaring headline: U.S. Fiscal Failure Warrants a De-Americanized World. The hypocritical commentary states the following:

  • “Instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas.”
  • “Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.”
  • “To that end, several corner stones should be laid to underpin a de-Americanized world.”

Another Shutdown on Horizon?

It should be clear by now that America can ill afford another gaping fiscal wound caused by a reckless government shutdown or near default on the debt.

Regardless, it’s possible a second shutdown may be on the horizon due to the deadlines imposed by Congress in ending the last one.

A second shutdown or near debt default in just a few short months would cause additional serious damage to the federal workforce, the lackluster economic recovery, American global leadership and international financial stability.

For the sake of America and the world let’s hope the adults in Congress are able to resolve the many vexing fiscal issues dividing lawmakers. America needs a long-term budget and debt ceiling agreement now so Congress can return to “regular order” ASAP.

If not, the USA and world markets will surely pay the price on multiple fronts for another shutdown and/or near default on the debt.

This would cause the economic recovery, along with America’s global credibility, to take another ill-advised punch to the gut.


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* All views and opinions are those of the author only.

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Dick Davies

The feedback I’m getting is it wasn’t America that shut down, it was our government. I had a businessman tell me, “Hardest thing to work around is a bad partner.”

David B. Grinberg

FYI: Article from Think Progress:

Shutdown Will Continue To Damage Economy Through The Holiday Season, Economists Predict

  • “The shutdown deal, which funds the government through January 15 and postpones the debt ceiling until February 7, all but mandates another down-to-the-wire budget battle, Moody’s Analytics economist Mark Zandi told CBS’s Face the Nation host Bob Schieffer on Sunday.”

  • “Zandi said that while some of the $24 billion of lost economic activity during the shutdown will be recovered, the inability of businesses and consumers to plan for more than a couple months at a time is ‘corrosive’ to the economy.”

  • “Pervading the entire economy is this uncertainty, which I think the effects of that are corrosive, have been accumulating over the past few years,” Zandi said. “And obviously given the nature of the deal is we’re going to take this into next year, will continue.”

David B. Grinberg

FYI: The Wall Street Journal reports:

White House: Shutdown Cost U.S. 120,000 Jobs

  • “Jason Furman, chairman of the White House Council of Economic Advisers, said the shutdown and threat of default lowered sales, steel production and the number of mortgage applications filed.”

  • “He said the council look at a variety of data, including consumer confidence surveys, sales growth figures and claims for unemployment insurance, to arrive at their number.”

  • “The White House data took into account information only through Oct. 12, meaning the economic harm could grow once more information is available.”

  • “The White House figures for the drop in economic growth are in line with estimates from economists.”

David B. Grinberg

GovExec.com reports

John Kerry:Foreign Leaders Mocked Us Over Shutdown

  • “I have seen how our allies, our partners and those who wish to challenge us or to do us harm are all sizing us up every day,” Kerry said.

  • “What we do in Washington matters deeply…that’s why a self-inflicted wound like the shutdown can never happen again.”

  • “The dysfunction and the shutdown and the simplistic dialogue that came with it didn’t impress anyone,” he said.