‘Too soon’ to know U.S. govt shutdown impact
Guardian Business Editor
Published: Oct 02, 2013
As the U.S. Congress took the dramatic step to “shutdown” portions of the federal government, a top local analyst has suggested that it is “too soon” to know what the possible ripple effects in the Bahamian economy will be.
Congress on Monday failed to approve appropriations bills that would keep the U.S. government funded beyond the fiscal year end on October 1, causing the government to shut down numerous agencies, and sending over 800,000 of the federal government’s 2.1 million civilian employees home without pay.
The failure of the spending bill to pass came as Republicans intent on derailing President Barack Obama’s flagship healthcare law sought to make the unwinding of this legislation a condition of passing the budget.
Kevin Burrows CFA, senior vice president at Colina Financial Advisors Limited (CFAL), said that it is too early to know what impact the shutdown will have on The Bahamas, which is so intrinsically linked to the U.S. economy.
He noted that to date, U.S. markets have not responded in an overly negative manner to the news coming out of Washington, D.C.
“I think it’s way too soon to begin thinking about impacts on the Bahamian economy.
“US markets are pricing this as a non-event: the US 10-year yield (on US Treasury bonds) is basically unchanged and the Dow is up 72 points, even though it sold off about 128 points yesterday when it became apparent the shutdown would occur.”
Burrows said he views the shutdown as “political theatre” which will be resolved, and views as “unthinkable” the possibility that the U.S. government would ultimately default on its debt as a result of failing to come to a budgetary agreement - an outcome which would surely send much greater shockwave around the global economy, and certainly into The Bahamas.
Commenting on the size of the impacted workforce, and whether this might have a knock-on effect on tourism arrivals to this nation, Burrows said this seems unlikely.
“The total US civilian workforce is about 154 million people so even then we’re talking about 0.5 percent of the working population. And it will be a timing issue if anything – they do get paid their backpay eventually,” he added.
To date it is not known how long the government shutdown will last. The longest such event occurred in 1995 - 1996 under the Presidency of Bill Clinton, when workers were sent home for three weeks.
Goldman Sachs has estimated that another three week shutdown could shave 0.9 percent off overall U.S. GDP this quarter.