Debt Ceiling Train Wreck Waiting to Happen: Shapiro

REPLAY VIDEO
Your next video will start in
Pause

Recommended Videos

  • Info

  • Comments

  • VIDEO TEXT

Sept. 30 (Bloomberg) -- Joshua Shapiro, Chief U.S. Economist at Maria Fiorini Ramirez, along with Bloomberg’s David Plouffe and Michael McKee, discuss the economic impact of a U.S. government shutdown. They speak on Bloomberg Television's “In The Loop.” (Source: Bloomberg)

Really what we are dealing with because we really do not know what will happen.

We ended up with the cost of $1.5 billion or a millionth of the economy.

Translate in today's dollars two .3 billion, still one million of the economy.

Not clear it would be a whole large hit.

What we do not know is not only how long it lasts but how many employees are furloughed.

Best guess around 800,000. 700,000 defense department employees for about 3.5 days.

Not clear it is going to be a major hit yet.

Omb will decide how many people are off the job.

You look at what happened back in 1990 six.

Shave half a percentage point off of gdp.

That was quickly recouped because you got back pay and government contracts were eventually paid.

I am curious what this does to the american psyche and how that affects the economy.

Is there a chance people will be worried enough that they may slow down spending or not it?

I think this gets to the whole question of leadership and responsibility in terms of government.

We have the debt ceiling in 17 days.

What is going on now is small potatoes relative to that.

This does not bode well for government negotiations, which are basically a train wreck.

Any sense what will happen with friday's jobs report?

We are expecting that to be released.

If there is a shove or -- government shutdown, will we not get that?

We dealt with that back in august of 2011. my recollection is that jobs through port would be released.

-- jobs report would be released.

You will have a sense of unease out there.

There is a sense we can't have an economic crisis brought on by political dysfunction.

The economy is too weak to handle that kind of shocked to it.

If you are talking about those kinds of impacts am a we will set back the recovery even further.

This is all caused by elected officials unable to keep government open and pay the bills.

I love the comparison back to 1995 and 1996. this time around is slightly different.

One is because you have the looming debt ceiling, and to because you do not have a unifying force ringing republicans together to help reach some kind of compromise.

Instead, a situation where the tea party is almost holding the rest of the party hostage.

Can we really compare and contrast what happened before with what is happening now?

Pre-k's i was covering the white house then.

-- i was covering the white house then.

There were two sides.

Resident clinton could pick up the phone and talk to newt gingrich and vice versa.

It is hard to know who president obama would pick up the phone and call at this point, which is what makes it very difficult.

On the other hand, the economy was not that strong in 1995. we were just beginning the expansion.

There were concerns than about what would happen to the economy.

The fourth quarter last year we only grew .4%. we could find ourselves back there very quickly.

2.5% growth is nothing to write home about.

Alternately, how do you think this affects us go the economy is fragile to begin with and not something you want to add to the picture.

I think the short to permit shutdown is not a big deal.

The bigger deal is the debt ceiling and how they approach that and whether we risk default.

I think that affects financial markets and the major e waite -- major way.

That is the major focus.

We will talk about that next.

A perfect segue.

We will speak with you later on.

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change