Gov't Shutdown Likely to Be Short: Holtz-Eakin

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Oct. 1 (Bloomberg) –- American Action Forum President Douglas Holtz-Eakin discusses how the U.S. government shutdown will impact the economy with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

The first time in 17 years, the u.s. government is in the midst of a partial shutdown.

As many as 800,000 federal employees were forced to stay home.

What are the consequences for an economy looking for sustained momentum?

Presidents of the american action form and a former economic advisor to president george w. bush, the institute just published a paper entitled "government shutdowns." he joins us from washington.

Thanks for joining us.

What are we to make of our dysfunctional government?

This is not good news from the point of view of federal governance.

There is a question as to what the impact will be on the economy.

It is expensive to mothball facilities and it is expensive to start the backup.

Does tend to come out in the $1 billion or $2 billion price tags.

The real issue is the larger economic impact.

Over a longer time, the absence of paychecks and the impact on government purchases starts to take a toll on the economy.

This is likely to be relatively short.

Creeping up on the debt limit, that is probably the day all of this gets resolved.

The affordable care law is at the heart of the partisan divide.

The president and congressional democrats say it is not going to happen.

When will the stalemate and?

It is far from obvious.

The republicans are asking for a regular order for the senate and the house to sit down and work through their differences to send a unified east to the president.

The democrats are refusing to negotiate whatsoever.

They are funding little pieces of a nuisance like posing national parks and not processing veterans disability.

That public relations war will continue and it will either become untenable for the democrats to keep turning down funding pieces of the government , or republicans will run out of time and have the raise the debt ceiling.

Dosh the online marketplaces the center fees -- centerpiece of the affordable care law.

There were some technical glitches, but the launch date was matt.

Are the technical breakdowns evidence that the law does not work?

I think the technical glitches are a real disappointment.

They have been planning for a launch date.

I was not comforted by the fact that in 34 states, the sites did not work.

I understand there was a lot of traffic but you would think for the largest government expansion and entitlement programs, they would expect a lot of traffic.

What it means for the future is how they respond.

You go back the next day and it works, you forget about it.

If you keep going back and it doesn't work, you get a bad label.

What matters is not what happened today.

They said to expect one out of 10. the question is what it looks like tomorrow.

I have to ask about the republican stance.

Is this helpful or hurtful for the republican brand to tie this argument of less government and smaller government to the health reform law?

Is this going to serve them well or hurt them?

It is clear in the polling data that the public, especially independent and swing states, they will matter in 2014. they don't like obamacare and they've believe it should be defunded and parts of it d. wade.

The question is whether that same election will put up with a government that gets shut.

You said a lot of people don't like the law, but even as senator john mccain says, it is settled law and the will of the people was made in november of 2012. if they didn't want the health care law, they could have voted for mitt romney.

That is certainly a personal position.

What you're seeing is trying to lay the groundwork for the next election and republicans are no different from any other politician.

They see the opportunity here.

They feel the shutdown will hurt republicans.

President of the american action forum, with us and talking about dysfunction in government and a health reform law.

Doug will stay with us and we will continue our discussion when bottom line continues in just a moment.

? continuing our conversation on the government shutdown, thanks for staying with us.

We have learned that treasury secretary lu has sent a letter to speaker boehner that the u.s. has begun using the final extraordinary measures to avoid reaching the debt limit and he repeated the measures will be exhausted no later than october 17. if government shutdown was bad, this will be worse, right?

I never thought that a government shutdown was a strong threat to the economy.

Historically, they haven't damaged economic growth and most of the problems our cash flow.

It amounts to shift in timing.

The debt limit is a different animal.

The perception by markets that if the u.s. was in technical default, full-scale default, or unable to manage finances, it would have rapid and severe repercussions.

All parties are aware of this but it has crept up pretty close in the past.

They have expressed concern about harm that shutdown will do to growth, shaving is much as a full percent or more from gdp.

I don't think it will be that large.

Most of what happens in a government shutdown is timing.

People don't get paid, but then they get act paid.

What you lose up front you again later in the year.

I don't think it is a big growth threat.

Should the budget process be overhauled?

Is there a mechanism where money is appropriated automatically?

If no budget agreement is reached?

We already have automatic appropriations.

Social security, medicare, medicaid.

So the vast majority is already on autopilot and many people think that is the problem.

It is not ever the case that the house passes a budget and they agree and the president signs that budget.

We don't actually agree on budgets in washington.

Is the united states ungovernable?

I don't think so.

There was a time when it happened quite frequently.

It is part of the debate over which direction a free society should go.

It is a nuisance, but a sign of strength.

We settle our differences in this way and people don't take to the streets.

We don't have overthrows.

We have spirited disagreements.

Something that david gregory asked this weekend, when is a lawn not a law?

When it is fully funded and fully implemented.

Obama care is just before that so we are seeing how it gets paid out -- laid out.

It is always great to get your perspective.

U.s. diplomacy in asia may also be hit by the stalemate in washington.

The top stories in asia are next.

You are watching "bottom line." on bloomberg television.


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