How Trump’s Shutdown Will Cripple US Economy, Explains Economist

• First quarter growth in 2019 may turn zero
• Consumer confidence down to the lowest ever
• Federal workers and contractors not being paid

A dire forecast from a senior Trump administration official has warned of serious damage to economic growth in the first three months of 2019 if no solution comes up for ending the government shutdown and funding lapse.

Kevin Hassett, chairman of White House Council of Economic Advisers in an interview to CNN, contradicted the rosy economic scenario projected by President Trump. Trump news-makers had highlighted a recent tweet by the President that carried an optimistic economic outlook.

In a tweet, Trump said on Monday that “the United States has a great economic story to tell. Number one in the World, by far!”

Scare of Zero Growth To Economy

Hassett warned that the economy’s growth rate for the first quarter of the New Year could slump to zero percent if the stalemate prolongs, especially in the wake of the vehement resistance by lawmakers from the Democratic Party.

“If it extended for the whole quarter, and given the fact that the first quarter growth rate tends to be low because of residual seasonality, then you could end up with a number very close to zero in the first quarter,” the U.S. economist added.

Officials have noted that partial government shutdown has been chipping away weekly growth at the rate of 0.1 percent a week. The first quarter growth is already struggling below 2 percent. Hassett may have based his forecast on this tough premise.

Current Government Shutdown

The shutdown began in December after a bipartisan spending bill was blocked in the Congress seeking to appropriate $5.7 billion to erect a wall along the U.S.-Mexico border. It was a poll promise of Trump and he had claimed that Mexico would also fund the border wall.

The shutdown has caused misery as halted federal spending has left projects in disarray. Payment for 800,000 federal workers has been withheld creating distress in earning families.

Government contractors are not being paid and businesses are stretching to their limit.

The brewing crisis caused by the Trump wall has hit the consumer confidence as well. It has ebbed to the lowest under Trump regime, noted a study by the University of Michigan. Housing sales also dipped and there is pervasive economic anxiety.

However, Hassett gives some hope that after the shutdown gets over, the government will work towards a “humongous” growth rate to better the second quarter.

But Trump has warned that he will not mind keeping the government shut down for months or years if the funding demand is not met.

Government Shutdown 2013

The situation had a parallel under Barack Obama's presidency. The government shutdown 2013 was spurred by the Obamacare Bill for healthcare.

A section of the Republican Party was against the affordable healthcare law and insisted on a separate spending bill to fund other expenditure heads of the U.S. Federal Government.

In the tussle, the refusal of the U.S. Congress to pass a law for appropriating funds beyond September 30, 2013, led to the shutdown of the Federal Government.