Crosby Stills and Nash, Neil Young, Joni Mitchell, the Doors, the Eagles, all became his friends and subjects.
The economic consulting firm IHS Global Insight calculates that the government shutdown costs taxpayers $300 million a day, or $12.5 million an hour, in government work and services that are not being provided.
The stock market rallied yesterday on day one of the shutdown, but losses are expected today.
Some of the other ways the shutdown affects the economy: home buyers and small businesses are expecting fewer federal loans, and the federal government might have to slow down Medicaid payments to states, which means states might slow down reimbursements to hospitals.
JEREMY HOBSON, HOST:
From NPR and WBUR Boston, I'm Jeremy Hobson.
ROBIN YOUNG, HOST:
I'm Robin Young. It's HERE AND NOW. The impact of the government shutdown is already being felt at closed Head Start centers and national parks. Some government food programs could soon run out of money.
HOBSON: And economists are starting to calculate the damage to the economy. Moody's does the math and says a three or four week shutdown would cost the economy as much as Hurricane Katrina and Superstorm Sandy combined. Joining us from New York for a look at what the shutdown means for the economy is Julia Coronado, chief North America economist with the investment bank BNP Paribas. Julia, welcome.
JULIA CORONADO: Thank you very much.
HOBSON: Well, so some economists have been saying that for each week that this shutdown goes on, that the U.S. GDP loses, what, a tenth of a percent, two-tenths percent? What's the real story? What are you looking at in terms of the economic impact of the shutdown?
CORONADO: Well, as you alluded to, the direct impact of the shutdown is actually pretty small. I mean we are a $16 trillion economy. The federal government is about seven and a half percent of that, and a lot of the federal government agencies are still functioning, the post office and the Homeland Security and so on.
So it really is a fairly small direct impact, but as time goes on, some things start getting disrupted like, you know, mortgage processing through the government agencies that underwrite mortgages does start getting delayed. And of course, you know, then we run into the bigger worry, which is the debt ceiling, which is - looms large.
The Treasury had said October 17 is the deadline, and the longer this shutdown stretches on, the more likely these two things are going to collide in an even nastier showdown.
HOBSON: Right, and I want to get to that in a minute, but do you think just based on the shutdown of the government right now that anybody out there is saying, well, maybe I won't hire this worker at the moment because we don't know what's going to happen with the economy? Is it creating that kind of uncertainty, do you think, in the private sector?
CORONADO: Probably not that degree of uncertainty, at least not yet. I mean businesses, we knew this was a threat. In general the first pass for most businesses, I would think, is to see this as political theatrics that will get resolved. But there are a lot of companies that do business with the federal government, have some kind of connection, that could get disrupted, and then this just goes along with a lot of general uncertainty, general uncertainty about regulation, general uncertainty about the economy.
So it doesn't help by any stretch boost confidence in the future or clarity in the future. So I wouldn't say it's going to have an immediate direct impact on hiring decisions, but it doesn't help businesses make those kinds of decisions.
HOBSON: What about worries about Europe, which is just starting to come out of recession? There is talk today that if this shutdown lasts for a while, it could have an impact there. Do you see that?
CORONADO: Well, as you note, I mean it's actually been pretty good news in Europe lately. There's some stabilization in the economy, and there's been a lot of fiscal progress. So there doesn't look to be as much fiscal retrenchment in Europe. But the U.S. is the biggest economy in the world, and the dollar is the currency in which global business gets done. So the more this drags on, the more it will have an effect not just in Europe but in Asia, in Latin America.
So it can become disruptive globally, and I think we're starting to see markets get a little bit nervous about that today. Yesterday people were sort of, you know, dismissing it as a temporary phenomenon, but the more this drags on, the more I think people will get nervous that, wow, if the U.S. government is shut down, can't function, is possibly going to default on its debt, you know, what is the hope for the global economy?
HOBSON: Well, and let's talk about that, because these are two different fights, as you know. This is the shutdown, this is about authorizing spending, but then there is the fight that's coming up in the next couple of weeks that has to do with the U.S. government paying the bills that it already has and whether to raise the federal debt ceiling.
What are people like you, economists on Wall Street, thinking about what might happen here and whether there's a real risk of a default?
CORONADO: So it's a much more serious issue than a temporary government shutdown. You know, this is something that certainly the rating agencies are watching this very carefully. If the U.S. were to even go into a very temporary default or technical default on its obligations, we would get downgraded, and that would just throw the global financial system into disarray.
You know, with the government shut down we can look at how many employees are affected, what are the dollars involved, calculate it in terms of GDP growth. With a government default, that becomes a confidence issue, and as we've seen before in these financial crises, be it our financial crisis or the European financial crises that we've had over the last several years, you know, the financial system is built on confidence, and it's built on rules of the road, and when those rules start to get broken, and that confidence starts to break down, the whole system can seize up.
So that is a much bigger concern. I think - I hope people in Washington certainly understand that. But this stalemate is - it's been surprising in how entrenched both sides are and how unwilling they are to come to the table. So it's becoming a little bit more worrisome, I would say.
HOBSON: Julia Coronado is chief economist for North America for the investment bank BNP Paribas. Julia, thanks so much for talking with us.
CORONADO: It's a pleasure, Jeremy. Transcript provided by NPR, Copyright NPR.