A Bad Economic Time for a Shutdown

The last time we had a government shutdown was November 14 through November 19, 1995, and from December 16, 1995 to January 6, 1996. Back then unemployment was 5.6%.  Now it is 8.8%, and that’s a low estimate given how many people have left the labor market.  To put that in perspective:

How will this impact jobs?  Bo Cutter:

The second thing you notice is a real slowdown in everything. There’s no place to call and find out what’s happening to a particular grant. If you’re Caterpillar and you sell heavy earth moving equipment and you had a contract in competition with others being considered by the Department of Transportation, your contract isn’t going to get looked at. So the people whose jobs depended on that work lose their jobs.

Will there be job losses?

Bo Cutter: Yes, the second effect is people beginning to lose their jobs. And that surprises people. It happens in two ways. One is the federal employees. People are very funny about that. The vast majority of federal employees don’t work in Washington. They work out in the real world. When people yell and scream about government in Washington, they don’t really think that about Joe who lives next door and works for the Department of Transportation’s regional office. What Joe is frequently in the business of doing is providing services to his neighbors, providing information about grants and contracts and all of that. They don’t really think that Joe’s one of those people in Washington that they don’t like, Joe’s a neighbor who’s got a job like everybody else and suddenly he’s out of work. Then all the people whose contracts, grants, etc. suddenly can’t get done, they feel it. It’s a progressive thing that you first feel the direct absence of things, then you see people aren’t working, then everything starts to slow down and stop.

Nobody picks up the phone to tell anyone the status of contracts – for all the Right has been going on and on about government uncertainty that strikes me as the actual definition of uncertainty.

It keeps going. There’s a lot of problems with the housing market right now. A shutdown will make it even worse because “lenders will not be able to order 4506Ts–tax transacripts–from the IRS. This is the principal source of income verification. Without it, lenders will not be able to underwrite borrowers.”

There are so many impact that we are discovering them in real time, and we don’t know what else will shut down that will impact markets. All this for an unnamed few billion in cuts and to defund Planned Parenthood. Shameful.

I do still believe that it’s better to hash it out now instead of during the debt ceiling fight. I really don’t think the Tea Party understand the dynamite they are playing with there, and nothing about this current battle makes me more confident that the party leaders can control their caucus.

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