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The U.S. Can Survive a Shutdown but Not a Default

The U.S. Can Survive a Shutdown but Not a Default
Photograph by J. Scott Applewhite/AP Images

As the World Bank and IMF meetings wrap up in Washington and the world’s finance ministers give Jack Lew little sympathy hugs on their way out, it’s a good moment to look at the U.S. government shutdown from an international perspective.vThough Congress’s refusal to pass a clean continuing resolution has inflicted considerable damage on the U.S. economy, the shutdown is a comparatively small economic event by global standards. The reverse is true, however, should the U.S. default on its debt obligations—where costs are likely to dwarf those associated with debt crises elsewhere in the world. And the combination of debt crisis and budget blockage together will make matters even worse.

To borrow an analogy from the world’s most popular sport, the federal shutdown was a stunning own-goal. Despite the fact the considerable majority of government employees remained at work and most spending continued, the budget impasse unnecessarily hurt prospects for recovery. The safety net, including supplemental nutrition for women, infants, and children, has been (further) shredded. It’s taking longer to get a mortgage. The U.S. did less health research and didn’t track diseases—breaking international commitments in the process. And we don’t even know the full impact on the economy, because a lot of the statisticians who usually calculate those numbers were sitting at home.