Shutdown has led to larger worries

‘Chaos’ rattles markets, sparks fears next crisis may spur U.S. recession.

WASHINGTON — Bernardine and Russell Yamamoto arrived in Washington from their home in Hawaii — their first-ever trip to the nation’s capital — to find the federal government shutting down. But as the couple waited to tour the U.S. Capitol on Dec. 22, the shutdown was the least of their worries.

“Washington just seems to be in chaos,” said Russell Yamamoto, 62. Bernardine, 60, agreed.

“What is going on? What is happening? A lot of people resigning from office,” she said. “It doesn’t give you a sense of comfort.”

On the first day of the shutdown, as hundreds of thousands of federal employees worked without pay, Congress abandoned negotiations and left town, and President Donald Trump threatened “a long stay,” the closure of the government — the third this year — was barely a blip on the radar amid the many other storms buffeting the nation.

In just one week, Trump upended foreign policy by announcing the abrupt withdrawal of U.S. troops from Syria. Defense Secretary Jim Mattis resigned in protest, alarming many members of the president’s own party. The Federal Reserve confirmed fears that the U.S. economy is slowing. And the Dow Jones industrial average plunged nearly 7 percent.

These chaotic events have rattled world markets and sparked concern that the next crisis could tip the nation into recession — with no certainty that the Trump administration and feuding lawmakers are up to the task of correcting course.

“The shutdown is a symptom of the fact that our government is simply not functioning to make policy in an orderly, sensible way,” said Alice Rivlin, who was director of the White House Office of Management and Budget under Bill Clinton when the government shut down in December 1995. “It adds to the uncertainty. The greatest effect is the concern over what happens next.”

Diane Swonk, chief economist of accounting and advisory firm Grant Thornton, called the shutdown “another straw on the camel’s back — and the straws are piling up.” She said she was already worried about a recession hitting in late 2019 or early 2020, “and something like this could make it happen sooner.”

Americans are more concerned about their finances than at any time in the Trump presidency, according to a November survey by the Federal Reserve Bank of New York. With Trump’s approval rating at 39 percent, according to a recent CNN poll, economists and political analysts will be watching closely to see how quickly Trump can resolve his differences with resurgent Democrats.

Funding for dozens of federal agencies and commissions expired at midnight Dec. 21 after lawmakers failed to reach agreement on a government funding plan.

After initially signaling that he would sign a bipartisan budget bill, Trump changed his mind and demanded that any bill include an additional $5 billion to build a wall on the southern border, a proposal rejected by Democrats.

The impasse persisted through Christmas week. In the meantime, an estimated 400,000 federal employees went to work without being paid, said Ashley De Smeth, spokesman for the American Federation of Government Employees, the largest federal employees’ union.

“What’s actually happening is a lot of employees are working for free,” De Smeth said, though she noted that Congress has traditionally voted to grant federal workers back pay after a shutdown.

On the streets of the nation’s capital, signs of the shutdown were mostly invisible. Carousel music spilled across the Mall as bundled-up tourists and locals braved a brisk wind that scattered leaves and slapped at the 50 American flags encircling the Washington Monument.

Almost all of the museums were open, and it was business as usual for the food trucks. T-shirt sellers hawked their Make America Great Again hats and Barack Obama T-shirts. Officials with the Smithsonian Institution said the museums had enough cash socked away to remain open through the shutdown for at least a week.

The story was different at many national parks across the nation, which did close their gates and doors. At Fort Sumter National Monument in South Carolina, where Confederate forces launched the Civil War by firing on a Union garrison in 1861, the visitor center was closed. On the park’s website, above the usual photo of an American flag flying at the fort, was a red banner warning: “Government Shutdown.”

Other services were unaffected, including the U.S. Postal Service, food safety inspections, law enforcement and airport security, the White House said in a briefing for reporters. But if the shutdown lasts beyond Christmas week, the impact could be felt much more widely. That, in turn, could further rattle the markets, cutting into the value of retirement accounts and other funds.

Jon Meacham, the presidential historian and author of “The Soul of America: The Battle for Our Better Angels,” said the shutdown comes at a defining moment in America, as an anxious public yearns for Washington to calm down and start solving the nation’s problems.

“In a sense, American history can be understood as a perennial battle between fear, which manifests itself in a politics and culture of exclusion and defensiveness, and hope, which manifests itself in inclusion and larger-heartedness,” said Meacham, who delivered the Dec. 5 eulogy for former President George H.W. Bush.

“We’re now immersed in a fearful time, a moment where we speak of walls and tariffs rather than the free flow of ideas and people and goods. But here’s the good — or at least goodish — news: History tells us that hope tends to win in the long run. There’s the Klan, but then there’s Dr. [Martin Luther] King. There’s Joe McCarthy, but then there’s [President Dwight Eisenhower].

“Right now, there’s Trump. But if folks work hard enough, soon there’ll be a restoration of dignity and forward thinking. That’s the task.”

One recent day, as the politicians squabbled and the markets shuddered, the nation’s political divide was evident among tourists wandering the National Mall. Lyda Peters, 75, had traveled with her daughter from Boston to spend a couple of days visiting the National Museum of African American History and Culture. Operated by the Smithsonian Institution, it was open — to their relief.

But Peters expressed disappointment “with respect to this president.”

“This is a great country that had made so much progress, but he is taking it way back,” she said. “All I can think about the state of our country right now is how scary it is.”