In an interview with Yahoo Finance’s Editor-in-Chief Andy Serwer at the World Economic Forum this week, EY CEO Mark Weinberger discussed the major consequences of the partial government shutdown that has dragged on for nearly six weeks.
While he didn’t think it would affect GDP, at least right away, he contended the shutdown’s greatest impact so far has been on public confidence.
“Generally, it's the confidence,” explained Weinberger, whose firm, formerly known as Ernst & Young, is one of the “big four” accounting firms.
Weinberger pointed out he’s seeing a “humanistic toll” from the shutdown, in particular on the hundreds of thousands of government workers who aren’t receiving paychecks. “It's damaged by people looking at a government — one of the most democratic and seasoned governments in the world — that can't operate, can't function. And what does this mean for the next two years in terms of policy? That's I think the biggest weight on the economy.”
‘It can reduce growth to zero’
Now approaching six weeks, the government shutdown has already hurt the U.S. economy so far. However, an estimated 800,000 government employees have been caught in the crossfire: 380,000 of whom have been furloughed with the remaining 420,000 working without pay. It has also stopped most food safety inspections. Commercial airlines, meanwhile, are reporting slower demand as airports struggle with understaffed security checkpoints. Delta (DLTA), for instance, said it expects to lose $25 million in revenues in January because of the shutdown.
Other consequences of the government shutdown, Weinberger says, may be smaller in scope, but significant.
“What we are seeing is it's harder to get IPOs through the SEC,” he added. “We're going to have the IRS trying to develop the tax refunds. It's going to maybe be a little slower.”
Should the shutdown continue for another few weeks, Weinberger says it could have larger repercussions on the economy.
Likewise, Jamie Dimon, JPMorgan Chase (JPM) CEO, said during a recent media call announcing the bank’s quarterly results that the shutdown could hamper the country’s economic growth.
“Someone estimated that if it goes on for the whole quarter, it can reduce growth to zero,” Dimon said during the media call. “We just have to deal with that. It’s more of a political issue than anything else.”
There was little indication this week the government standoff — the longest in U.S. history — would end anytime soon. The Senate on Thursday afternoon was scheduled to vote on two competing proposals to reopen the government, although both votes are expected to fail.
Weinberger, who served on President Donald Trump’s now-dissolved Strategic and Policy Forum, had some words of advice for Trump.
“If I had the opportunity, I would say, listen, for the good of the country, certainly for the good of your policy, for the good of the remainder of your term, work with the Democrats,” he said. “But I would also be saying the same thing to the Democrats. For the good of your new leadership coming in, hitting the ground running, building confidence in the U.S. economy, to keep the pro-growth that we've had, these incredible job numbers that we've had. You've got to figure out how to work together better, and get to the table, and figure this out.”
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