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Levin Report: The White House Only Just Realized the Shutdown Is Hurting the Economy (VF)

19 January 2019



Vanity Fair subtitle: From the people who brought you “who knew a shutdown would shut down the government?” comes this revelation, roughly 26 days too late.

“As some of you may recall, because it happened only five days ago, White House economic guru Kevin Hassett claimed last week on PBS NewsHour that the government shutdown isn’t a big deal, and in fact is arguably a good thing, because hundreds of thousands of furloughed workers are basically getting a free vacation. “In some sense, they’re better off,” the Council of Economic Advisers chairman said out loud, in response to the question “Is the government shutdown going to have a negative impact on the economy, particularly if it drags on?” But just five days later—and some 26 days into the shutdown—the White House has apparently come to a new conclusion: this whole government-closure business might have a pretty bad impact on the economy!

The partial government shutdown is inflicting far greater damage on the United States economy than previously estimated, the White House acknowledged on Tuesday, as President Trump’s economists doubled projections of how much economic growth is being lost each week the standoff with Democrats continues.

The revised estimates from the Council of Economic Advisers show that the shutdown, now in its fourth week, is beginning to have real economic consequences. The analysis, and other projections from outside the White House, suggests that the shutdown has already weighed significantly on growth and could ultimately push the United States economy into a contraction.

That the Trump administration—which reportedly didn’t realize a government shutdown would shut down the government—is playing catch-up here is, sadly, not that surprising. But now that they’re up to speed, they know exactly who to blame, and somehow it’s not the guy who single-handedly brought the federal government to a halt.

For now, the White House shows no signs of being ready to relent, and Hassett, the chairman of the Council of Economic Advisers, continued to blame Democrats for the economic damage. 

“Congress needs to look at the harms that we’re talking about,” Mr. Hassett said, “and address them.”

While tens of thousands of federal employees have been called back to work without pay in order to process tax returns in the hopes of blunting the shutdown’s economic impact, experts say the longer Trump digs his heels in, the worse things will get. As Sam Berger, a senior adviser at the Center for American Progress, told Bloomberg, “Shutdowns don’t get bad linearly; they get bad exponentially.” In a research note issued on Tuesday, Bernard Baumohl, the chief global economist for the Economic Outlook Group, wrote that the shutdown “is threatening to derail this economic expansion,” and that its effect on federal workers’ spending plans is particularly worrisome for the housing and automotive markets, which were “already showing signs of trouble before the shutdown.”

Hassett, who, as a reminder, suggested less than a week ago that furloughed workers should be thanking Trump for the free time off, said on Tuesday that one of his furloughed staffers has started driving for Uber to make ends meet, and that the shutdown could permanently hurt economic growth expectations even after the government reopens—whenever that may be!—if markets and businesses suspect the president will pull this stunt again. At which point, we can probably expect the C.E.A. chairman and author of the book Dow 36,000 to claim shutdowns actually make the economy stronger.”



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