US econ­omy en­ters un­charted ter­ri­tory

Manila Times - - Foreign Business -

WASH­ING­TON, D.C.: The US gov­ern­ment shut­down on Satur­day be­came the long­est in his­tory and is tak­ing a grow­ing bite out of the world’s largest econ­omy with each pass­ing day, econ­o­mists say.

While most of the 21 “lapses” in

left barely a scratch on eco­nomic growth, the length of this shut­down makes it harder to say just how bad the im­pact could get.

“It’s not a hard stretch to say that ini­tially it’s smaller and then it ex­pands, the pain starts to widen,” Beth Ann Bovino, chief US


With about a quar­ter of the fed­eral work­force af­fected, the shut­down is cur­rently squeez­ing an es­ti­mated $1.2 bil­lion a week out of the econ­omy, Bovino said, but that fig­ure could grow if it drags on.

At the cur­rent rate, within two weeks it will have cost Amer­ica more than the $ 5.7 bil­lion US Pres­i­dent Don­ald Trump is de­mand­ing for a wall on the bor­der

Con­gress that led to the fail­ure to pass fund­ing for gov­ern­ment op­er­a­tions.

Fol­low­ing ex­tended clo­sures in 1995 and 2013, the US econ­omy con­tin­ued to grow while stock mar­kets mainly went side­ways.

And GDP growth lost in one quar­ter can re­bound in the next as the gov­ern­ment springs back to life and work­ers re­coup lost salaries. But some losses can never be re­cov­ered.

In myr­iad but of­ten un­seen

is felt in the daily lives of all Amer­i­cans, well be­yond the 800,000 gov­ern­ment work­ers now go­ing with­out pay -- many of whom missed their first pay­checks on Fri­day.

Switch­ing off even a part of the gov­ern­ment means that life force quickly be­gins to bleed away.

Pay­ments to farm­ers and poor fam­i­lies, craft beer la­bels, food in­spec­tions and eco­nomic data all have fallen vic­tim to the bud­get im­passe.

Hurt­ing the poor­est most

- to the mort­gage in­dus­try were

at stake.

“The ten­ta­cles start to touch many av­enues of life and that’s a very sad thing,” Bovino said.

US Coast Guard cut­ters, their crews work­ing with­out pay, on

com­mer­cial ports in the frigid wa­ters of Great Lakes near the Cana­dian bor­der so lo­cal steel mills can re­main sup­plied with iron ore.

- lect aid pay­ments de­signed to help ease the pain caused by Trump’s trade war with China. Small Busi­ness Ad­min­is­tra­tion

fo­cus on low­er­ing bank re­serve re­quire­ments.

“We ex­pect the BSP to cut the RRR (re­serve re­quire­ment ra­tio) by 300 ba­sis points in 2019, with the loans to help mom-and-pop busi­nesses try­ing to in­vest, hire and grow have been de­layed.

There are no gov­ern­ment loans for seeds or cat­tle feed and none of the reg­u­lar Agri­cul­ture Depart­ment data about crop yields and com­mod­ity prices that farm­ers de­pend on to plan for the com­ing year.

Per­mits from some oil and gas drilling — which feeds into GDP cal­cu­la­tions — are de­layed.

Bloomberg es­ti­mates that gov­ern­ment con­trac­tors are los­ing $200 mil­lion a day, cut­ting rev­enues for de­fense in­dus­try gi­ants like Boe­ing, Gen­eral Dy­nam­ics and Lei­dos.

na­tional parks nor­mally gen­er­ates a re­ported $18 mil­lion a day, but with some parks unat­tended and many ser­vices halted, lo­cal restau­rants, ho­tels and shops are los­ing cus­tomers.

Gov­ern­ment as­sis­tance to feed the poor­est Amer­i­cans is funded through next month only.

None of this in­cludes the hard­ships felt by the 380,000 fed­eral work­ers who have been fur-

deemed “es­sen­tial” but are work­ing with­out pay.

mil­lion a month in rent and mort­gage pay­ments, ac­cord­ing to the

Around the Wash­ing­ton re­gion, home to about 20 per­cent of the fed­eral work force, restau­rants are sit­ting empty, taxis are idled and

- rie ease along the cap­i­tal’s choked boule­vards.

Yin­grui Huang, an en­gi­neer for a de­fense con­trac­tor at NASA’s God­dard Space Flight Cen­ter in

nor­mally at work build­ing weather satel­lites and tele­scopes for the gov­ern­ment but is shut­tered un­til fur­ther no­tice.

To fight bore­dom, he is now driv­ing for the mo­bile ride hail­ing ser­vice Lyft but said he was most con­cerned hourly em­ploy­ees like jan­i­tors, cafe­te­ria work­ers and sec­re­taries.

“Their salaries are def­i­nitely lower than most of the en­gi­neer­ing staff. They don’t get the lime­light. We don’t think about them,” he said.

Eco­nomic re­search on the last ma­jor shut­down in Oc­to­ber 2013 found many fed­eral work­ers were largely able to avoid sink­ing into debt -- de­lay­ing mort­gage pay­ments and shift­ing bal­ances be­tween credit cards.

But that shut­down lasted for barely two weeks -- one pay cy­cle -- and law­mak­ers at the time had quickly promised work­ers would re­ceive back pay.

“It’s pos­si­ble that the ef­fects will be greater for this shut­down,” Univer­sity of Chicago econ­o­mist Con­stan­tine Yan­nelis, who stud­ied the 2013 shut­down, told AFP.

“The longer a shut­down lasts, the more per­sis­tent a change in habits you could see.”

The RRR is the pro­por­tion of cur­rent de­posits that banks need to keep with the cen­tral bank against the sum they can loan out to bor­row­ers.

One-per­cent­age-point cuts to the ra­tio, cur­rently at 18 per­cent, were

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