Donald Trump declines to answer a final question from the press as he departs the White House, January 14, 2019 (Win McNamee/Getty)
The White House acknowledges that the Trump Shutdown is slowing US economic growth, inflicting far greater damage than previously estimated.
The Council of Economic Advisers doubled its projections of economic losses on Tuesday, the 25th day of the shutdown caused by Trump’s ultimatum for $5.7 billion for his $25 billion Wall with Mexico.
Vice President Mike Pence has said that the shutdown will not halt a “roaring” economy, but White House officials are now cautioning Trump about the damage, amid Trump’s trade war with China and the effect of a $1.5 trillion tax cut on the Government’s financial position.
But Trump — who has spoken of a shutdown of “months or even years” — showed no sign of limiting his demand. Instead, the Administration called back 50,000 Federal employees to work without pay, for the processing of tax returns, assurance of airport security, and inspection of food and drugs.
About 800,000 employees have been on furlough or working without pay since the closure at midnight on December 21. Public services have been shut, with threats to food stamps, tax refunds, farm subsidies, manufacturers’ applications for tariff exemptions, testing of food and drug safety, and monitoring of the stock market.
Kevin Hassett, the chairman of the Council of Economic Advisers, said Tuesday that the shutdown is reducing quarterly economic growth by 0.13% for every week that it lasts. Contractors are losing work and unpaid employees are spending and investing less.
The loss of almost 0.5% in growth from the four-week shutdown is about one-quarter of the 2.2% growth rate for the first three months of 2018.
Haslett tried to deflect attention on Trump, “Congress needs to look at the harms that we’re talking about and address them.”
Yesterday White House invited several House Democrats to discussions. In the wake of Trump’s walkout from a breif meeting with legislators last week, none showed up.
On Tuesday, a Federal Reserve Bank of New York survey showed weakening manufacturing activity. Some economists are forecasting a US recession if the shutdown, which has broken the previous record of 21 days in 1995-96, continues past the end of March.
“The economy could easily stall in the first quarter, and then the question is what happens in the second”, said Ian Shepherdson, the chief economist at Pantheon Macroeconomics. “The longer it goes on, the longer it takes to recover.”
The shutdown “is threatening to derail this economic expansion”, Bernard Baumohl, the chief global economist for the Economic Outlook Group, said in a research note.