Treasury Secretary Janet Yellen is warning about the potential damage a government shutdown could inflict on the U.S. economy as it looms.
Yellen is concerned about the immediate and long-term repercussions, with a particular dread that a government shutdown could trigger a recession.
In a recent interview with NPR, Yellen expressed grave concerns about the possibility of a government shutdown, describing it as “reckless” and highlighting the imminent damage it could cause.
She is concerned about the harm escalating over time, reflecting a growing consensus among economic experts and policymakers that this could be a significant threat.
Secretary Yellen also emphasized the psychological impact of political paralysis on businesses and consumers, stating that it could erode confidence in the economy, which could result in decreased spending and investment.
This lack of confidence can negatively affect economic growth and stability.
Secretary Yellen confirmed that the Treasury Department has begun preparations for a government shutdown because of these imminent threats.
This includes arranging for most department employees to be furloughed and developing a contingency plan commensurate with the gravity of the situation.
Economists have emphasized that the magnitude of harm caused by a government shutdown is proportional to its duration. The longer it lasts, the greater the economic consequences.
Yellen referenced the White House Council of Economic Advisors’ estimates, which imply that a shutdown would reduce quarterly annualized economic growth by 0.1 to 0.2 percentage points every week it persists.
Yellen, an experienced policymaker who has witnessed previous government shutdowns, remarked that the current situation appears unique.
She attributed the gridlock and damage to the American people and the economy to a “small, extreme group of Republicans” in the House of Representatives.
The ongoing political impasse heightens the uncertainty surrounding the forthcoming government closure.
Bitcoin (BTC), the leading cryptocurrency, has shown signs of a bullish resurgence after a period of relative stability throughout September 2023 as the US government approaches the possibility of a closure. In an unexpected turn of events, the BTC price rose 1.5% on Friday.