Lost Confidence Biggest Shutdown Danger: Orszag

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Oct. 11 (Bloomberg) -- Bloomberg View columnist Peter Orszag examines the damage of the U.S. government shutdown and possibly breaching the debt ceiling limit and what he expects from the Federal Reserve. He speaks on Bloomberg Television’s “Bloomberg Surveillance.”

Damage is really putting appear from the shutdown, isn't it?

There are two aspects to that.

The first is the direct cash flow impact, which is about 15 or 20 basis points per week.

If we go through weeks, it is going to be 45 to 60 basis points off this quarter's growth.

We get a lot of that back in subsequent quarters, but it is not great trade far more importantly, what impact does this have on confidence?

How do you measure that?

We have computer -- we have consumer confidence indices.

That is the biggest danger, because if people who are not even directly connected to it is going on here get scared and they stop spending, then you could have a much bigger effect heard we are arty seeing a shaky consumer outlook.

Some of the big retailers like walmart and target were reporting -- we didn't need this.

We're on track for a decent 2014 because we had largely worked our way out of the financial crisis and now we're shooting ourselves in the foot.

Will be the cost if they do manage to pass this six week short-term deal to delay the debt ceiling?

I think the only issue is we will be back in the soup again in three to six weeks and that is the fundamental problem.

People need to get their heads around that we're going to keep having this happen and ultimately the cumulative effect of all those crises and other trauma is perhaps most damaging.

The fact that the federal reserve didn't taper or these back from its quantitative -- that is on hold until this is resolved.

You don't move to taper before?

Certainly, while we have the debt limit hanging out there i would expect absolutely no change whatsoever.

Even there after i think it will be delayed.

Is janet yellen going to be the next fed chairman.

Everybody is worried a little bit about the emerging markets and how hard they're going to be at.

Her primary responsibility is the domestic economy.

She is going to stay focused on that.

She has a very tricky -- assuming she is confirmed which i'm very confident she will be, she's going to have a very difficult line to walk in terms of how she starts to work out the fed's balance sheet without causing problems.

Forward guidance is going to be key.

I agree.

Do see a smooth exit here for the fed as you move into next year?

For now, but the art of policymaking and janet's big challenge will be exactly how to implement that.

It is not going to be a nice, calm dissent in a smooth landing.

There will be some bumps and a little bit of turbulence.

How one adjusts to that is going to be the key question.

All right, peter orszag, former economic director for president obama.

Not only the fed's fiscal drama or the u.s. fiscal drama, but the federal reserve policy and how it is going to get out of this extraordinary stimulus.

Bumps and -- it used to be that ceos couldn't stand politics or politicians, but now it seems that they're flying off in a private jets to washington every other week.

Maybe more frequently.

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

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