A long government budget fight and shutdown could make the markets even more volatile, economists are warning, as the showdown between President Donald Trump and Democrats over funding a border wall continues.
“What would be worrisome is if businesses start to lose confidence” in the federal government, Kathy Bostjancic, head U.S. financial market economist at Oxford Economics, told The Wall Street Journal.
“They’ll pull back on hiring, and investment, and it’ll become a self-fulfilling prophecy, where negativity in the stock market turns to negativity in the [broader] economy.”
The shutdown has left some 800,000 workers either on furlough or working without pay, but the initial effects have been deemed as small, with the shutdown falling on two weekend days and two federal holidays.
But there is danger in a prolonged stalemate, particularly amid rising tensions on trade between the United States and China, as well as rising interest rates and economic growth that is slowing worldwide, reports The Wall Street Journal.
According to S&P, the shutdown could also result in a loss of $1.2 billion in the U.S. gross domestic product for every full work week it goes on.
Forecasters, while saying they expect the U.S. economy to slow down in 2019, believe the risks could rise with a continuing shutdown that will become more difficult to resolve after Democrats take the House majority in January.
In addition, an extended shutdown may make it more difficult for the White House and Congress to agree on raising the federal debt ceiling next year, which would keep the government from paying off all its bills.
Sandy Fitzgerald ✉
Sandy Fitzgerald has more than three decades in journalism and serves as a general assignment writer for Newsmax covering news, media, and politics.
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