April 8, 2011

Government shutdown would cost the global economy

With just 12 hours for Washington to strike a deal and avert a government shutdown, economist Bruce Yandle, who served as the head of the FTC during the 1984 shutdown, explains that costs from a shutdown will radiate beyond our country and be felt by the global economy. 

“A brief shutdown, say, over a weekend or no more that 2 or 3 days, imposes relatively light costs across our economy,” said Yandle.  “We should note, though, that our economy here includes the world.  A federal shutdown includes federal operations worldwide.  The Office of Personnel Management estimates the daily cost of shutdown to be $100 million.”

Yandle explains that things like inspections of grain and other commodities headed to export markets will stop, causing the grain to sit and  delaying shipments.  Inspection of imported food products may also be delayed, and export/import permits and licenses will be delayed. 

“If embassies worldwide close or have reduced services, then people seeking passports and other services will be delayed,” said Yandle.  “Federal agencies worldwide - the FDA is an example - will delay services that involve international trade and commerce.”