Treasury Secretary Janet Yellen is warning about the potential damage that a government shutdown could inflict on the US economy. Yellen expressed concerns that a shutdown could push the country into a recession and emphasized the impact it would have on business and consumer confidence. She blamed a small group of Republicans for holding a continuing resolution hostage in the House, noting that their actions could cause significant harm to the American people and economy. Yellen mentioned that the Treasury Department has already started preparing for a shutdown, with the majority of workers expected to be furloughed.
Yellen’s alarm about the potential economic consequences of a government shutdown comes as the US faces the risk of political paralysis. She highlighted the psychological toll that such a shutdown could take on businesses and consumers, who may lose confidence in the stability and competency of the government. This could have long-lasting effects on the economy. Yellen drew attention to how this potential shutdown is different from previous ones, pointing towards a small group of Republicans using a continuing resolution as a bargaining chip. As preparations for a shutdown are underway, the Treasury Department is bracing for the impact by anticipating a significant number of workers being furloughed.
Economists have noted that the extent of the damage caused by a shutdown largely depends on its duration. Yellen referred to the previous shutdown in 2018 and 2019, which lasted over a month, and the estimations from the White House Council of Economic Advisors. The longer the shutdown, the greater the adverse effects on economic growth. Yellen highlighted the importance of avoiding such political gridlock and expressed hope that a resolution can be reached to prevent the potential detrimental consequences of a government shutdown on the American economy and its citizens.