BOSTON (CBS) – We hear a lot about the political fallout of a government shutdown and which party would carry the blame.
And while we still do not know what is going to happen in this latest budget standoff I can tell you there’s a lot more to this than optics.
A shutdown could hit you right in the wallet whether you work for the government or not.
And the longer it lasts, the greater the damage, according to the Congressional Budget Office.
A shutdown lasting several days wouldn’t leave much of a mark. But if a shutdown were to last a week or longer, all bets are off.
Remember, the shutdowns in 1995 lasted nearly four weeks combined. And economist Mark Zandi of Moody’s Analytics testified in Congress that a shutdown of three-to-four weeks could cut quarterly economic growth by some 1.4-percent, which is more than half the growth recorded in the last quarter. That’s a serious impact and one that we could all feel.
Indeed, we are already seeing this play out on Wall Street, where investors have little patience for this kind of uncertainty. The stock market has been down three sessions in a row – enough to wipe out the gains made after last week’s Federal Reserve meeting.
And there’s a lot more to lose here. Remember, stocks have been on a tear this year, up about 19-percent so far.
This is about psychology and it’s not limited to the stock market.
In fact, the bond fund PIMCO predicts a government shutdown would also cause companies to cancel investments and even their hiring plans, suggesting a government shutdown could impact every last one of us.
Follow Joe on Twitter @joemathieuwbz