Budget Fight

What happens to the U.S. economy if the government shuts down?

By Rana Foroohar Monday, Mar. 14, 2011

    • Congress signed off on a deal to keep the government funded through mid-March. But what happens next? The debate over raising the debt ceiling could be "nothing more than old-fashioned political theater," says Capital Economics chief U.S. economist Paul Ashworth. Let's hope. A similar spat in 1995 between President Clinton and Republican Speaker of the House Newt Gingrich led to a 26-day shutdown, during which 800,000 federal employees went on unpaid leave. Government spending fell 14.2% in the fourth quarter of that year, shaving a full percentage point off GDP growth. Note to politicians: with the recovery this shaky, that's a loss we can't afford.