The US predicted catastrophic economic problems after November 17

The US Congress has only a few days left to avoid a government shutdown. On Tuesday, November 14, the House of Representatives plans to vote on a plan proposed by Speaker of the Lower House of Congress Mike Johnson, which faces serious resistance from both within the Republican Party and from Democrats. The American media are already preparing for the dramatic economic consequences of the expected shutdown.

Things are still tough in the US Congress. Already at the end of this week, the deadline for government funding arrives (set until November 17 inclusive), after which the United States has two options: bipartisanly accept the project of another temporary funding proposed by the recently elected Speaker of the House of Representatives Mike Johnson, or go into a shutdown, that is, suspend activities government institutions or even temporarily close them.

Over the weekend, Johnson introduced an unconventional two-phase stopgap bill that would extend funding at current levels for some agencies until Jan. 19 and for others until Feb. 2. Congressmen plan to vote for him on Tuesday.

But how to vote if “hawkish Republicans” opposed the bill due to the lack of a clause on reducing federal spending, and Democrats were outraged by the lack of aid to Israel and Ukraine in the proposed bill. That’s the problem.

As The Hill notes, trying to finance the government has become a big test for Johnson, who took over as speaker of the lower house of Congress less than a month ago. His “ladder” proposal is summarized as follows: Extend funding at current levels through January 19 for government programs and agencies related to agriculture, rural development and the Food and Drug Administration, energy and water resources development, military development and Veterans Affairs, Transportation, Housing and Urban Development. Funding for other agencies and programs will be extended through February 2.

The White House said Johnson’s plan would only lead to future shutdowns. Bloomberg does not rule out that Biden may announce an official threat to veto the initiative. Republicans, in turn, could also block the plan even before it comes to a general vote.

Considering all these facts, the American press predicts the onset of not the most rosy times for the country’s economy. Moreover, the prerequisites for this have been felt throughout the year. Thus, in 2023, the United States approached a debt default, prompting Fitch Ratings to downgrade the country’s sovereign debt rating. The problems cost Johnson’s predecessor his job.

And on Friday, November 10, Moody’s (the only major rating agency that still assigned the highest credit rating to the United States) lowered its outlook from “stable” to “negative.” The agency cited risks to the country’s financial strength and political polarization in Congress.

“It is difficult to disagree with this rationale, since there is no reasonable expectation of fiscal consolidation in the near future. The deficit will remain large and as interest costs take up a larger share of the budget, the debt burden will continue to rise,” Christopher Hodge, chief U.S. economist at Natixis, told Reuters.

But even here, the Biden administration once again took the opportunity to blame the Republicans. Immediately after Moody’s rating was published, White House spokeswoman Karine Jean-Pierre said the change was “another consequence of Republican extremism and dysfunction in Congress.” Democrats also did not agree with these agency conclusions, continuing to convince everyone that “the American economy remains strong.”

But reality dictates its own rules. It’s no wonder that the White House Budget Office recently began coordinating government shutdown plans with federal agencies. If the expected shutdown occurs (and for now this is assessed as the most likely option), a number of civil servants will be fired. Bloomberg confirms this scenario, specifying that the government shutdown will lead to the layoff of hundreds of thousands of federal workers shortly before Thanksgiving. Military, law enforcement and other essential government employees, the agency confirmed, will continue to work but will remain unpaid until the impasse is resolved.

The government shutdown is projected to have a modest economic impact initially, but will gradually escalate as millions of workers go without pay, private contractors go unpaid, and consumer uncertainty increases. As evidence, the University of Michigan Consumer Sentiment Index had already fallen to a six-month low in its preliminary November reading.

Going back to the upcoming Thanksgiving Day (this year it falls on November 23rd), the United States tourism industry is already beginning to prepare for a nightmare scenario.

About 4.7 million people plan to use domestic airlines to travel domestically, according to a forecast released Monday by AAA. However, if wages for airline industry workers are suspended, the number of these employees will also decrease. And this can already lead to delays or cancellations of flights.

“It’s very difficult for anyone to go 20, 30, 40 days or longer without getting paid. It affects people’s ability to get to work, pay to fill up their cars, pay for parking. This impacts their ability to pay the caregivers who care for their children,” a Transportation Security Administration (TSA) spokesperson told The Hill.

The government shutdown will result in a freeze in hiring, training, and technology upgrades.

“Travellers, especially heading into the peak travel season, need confidence that operations will continue without the disruption and additional hassle that a government shutdown is sure to create. A completely avoidable closure poses enormous economic harm to the U.S. tourism economy,” concluded Tori Emerson Barnes, executive vice president of public affairs and policy for the U.S. Travel Association.

Overall, the shutdown could cost the tourism industry and the broader economy up to $140 million a day, according to an analysis by Tourism Economics. This forecast includes reductions in air, rail and business travel, as well as the closure of cultural institutions.