Many agree that the way in which a government shutdown impacts the economy depends on how long it lasts. “The effects build over time: Two weeks is worse than one week, and three works is still worse than two weeks, and four is still worse than that,” Congressional Budget Office Director Douglas Elmendorf said.
Mark Zandi, chief economist and co-founder of Moody’s Analytics, said that a shutdown for only a few days would affect the economy very little. However, he said that if the shutdown lasts a few weeks to a month, it “would do significant economic damage.” The GDP could be reduced by 1.4 percentage points during the quarter.
In relation to the previous shutdown of 1995, Zandi said that “the economy is much more fragile today than in 1995-96 when the economy was on the verge of the tech boom,” and therefore the damage could be greater.
CEO of PIMCO, Mohamed El-Erian, said that a shutdown “increases uncertainty which makes companies less willing to invest in new plants, equipment and hiring.” He added that it also “forces the Fed to continue with experimental policies, the impact of which are uncertain.”
