US Treasury Secretary Confirms Shutdown is Harming the Economy
Scott Bessent's remarks amplify investor fears of a broad risk-off sentiment as the ongoing government shutdown shows tangible economic consequences.
U.S. Treasury Secretary Scott Bessent has officially confirmed that the ongoing federal government shutdown is now inflicting tangible harm on the nation's economy, a statement that threatens to accelerate a risk-off sentiment among investors.
Speaking on the effects of the shutdown, which has entered its third week, Bessent stated the stalemate has started to materially affect the economy. His comments, , lend significant weight to fears that the political impasse in Washington is spilling over into the real economy, impacting everything from federal paychecks to critical government services.
The economic drag is quantifiable. Economists at JPMorgan have estimated that each week of the shutdown shaves 0.1 percentage point off annualized GDP growth. Similarly, a 0.15 percentage point reduction in the fourth-quarter growth rate due to the direct impact of federal furloughs. This disruption also means that official U.S. Treasury economic data releases will be delayed until the government reopens, leaving investors and policymakers in the dark.
The shutdown's impact extends far beyond macroeconomic data. Critical functions have been halted, including the National Flood Insurance Program's ability to issue new policies, potentially stalling real estate transactions in vulnerable areas. Furthermore, with hundreds of thousands of federal employees either furloughed or working without pay, the loss of income is expected to dampen consumer spending. The also includes a slowdown in new patient admissions at the National Institutes of Health and pauses on non-emergency food safety inspections.
For the market, the confirmation of economic damage from the highest levels of the Treasury Department could be a significant bearish catalyst. The heightened uncertainty over the shutdown's duration and ultimate economic cost is likely to weigh on investor confidence, potentially leading to increased volatility and a flight to safety in the coming weeks.