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Corporate America Watches Economic Toll of Shutdown, Debt Impasse

  • VOA News

Goldman Sachs Group, Inc., Chairman and CEO Lloyd Blankfein, right, accompanied by Bank of America CEO Brian Moynihan, speaks to reporters outside the White House in Washington, Wednesday, Oct. 2, 2013.

Goldman Sachs Group, Inc., Chairman and CEO Lloyd Blankfein, right, accompanied by Bank of America CEO Brian Moynihan, speaks to reporters outside the White House in Washington, Wednesday, Oct. 2, 2013.

Corporate America is voicing concern the partial U.S. government shutdown is taking a toll on the American economy.

President Barack Obama and congressional leaders started talking this week about ways to end the 11-day shutdown and increase the country's $16.7 trillion borrowing limit so the U.S. will not default on its financial obligations. But several corporate leaders were already telling investors that their company financial results and the national economy are being impacted.

The chief executive of one discount chain - Howard Levine of the Family Dollar Stores - said that "continued uncertainty in Washington will likely continue to pressure our customers' income." Other corporate executives said the Washington stalemate on spending policies weakens consumer confidence.

The chief U.S. economist at the Standard & Poor's credit rating service, Beth Ann Bovino, said in an interview with VOA that for every week the shutdown lasts, it cuts three-tenths of a percentage point from the country's economy in the last three months of the year.

"So if we're looking at two weeks, or coming on to two weeks, our forecast for fourth quarter growth was around three percent, which brings it down to now under two and a half," said Bovino.

She said the fact that several key government agencies that deal with the economy are all but shuttered has widespread implications, such as small businesses and farmers not being to able to get approval for loans to expand their operations. Some economists have estimated that the shutdown costs the U.S. economy $300 million a day.

Bovino said the shutdown especially hits local communities where there are heavy concentrations of government workers who have been furloughed without pay or have been deemed essential and are being required by the government to work without pay until the shutdown ends.

She said that initially there may not have been a substantial effect on the broader U.S. population, but there could be if the shutdown is not ended.

"If this lasts longer and longer, I suspect that it will affect consumer confidence. And when that happens, that means people are afraid to spend," she said.

She said that if federal workers are eventually paid, they could start spending again in the weeks ahead. But she said the costs that went into preparing for the shutdown would not be recouped.
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