Newswise — The current government shutdown is creating economic stress that has both short- and long-term consequences, says a Virginia Tech professor.
“The shutdown is causing an economic contraction in a variety of ways,” said Professor Mike Ellerbrock. “In the short-term, people are hurting right now to buy groceries, gasoline, things like that. And while Federal workers may be guaranteed back pay, that doesn’t mean that all the government-contracting industries are going to get their lost contracts back. That’s a potentially very large indirect effect. Plus, there’s a large indirect effect of uncertainty. Wall Street does not like uncertainty, in general, and historically. Personally, I’ve seen one of my retirement accounts drop by 10% and I’m not a federal employee.”
Ellerbrock also warns that the shutdown could have widespread impacts.
“If this continues, it will probably further erode a lot of people’s confidence in federal government. That will have long-term consequences, including globally. Credit markets around the world have become ever more cautious about investing in the U.S. Plus the trade war with China and increased tariffs – those shocks to the system hurt global confidence in the U.S. dollar and U.S. foreign policies.”
Ultimately, Ellerbrock suggests that the solution is more political and ethical stability.
Mike Ellerbrock is a professor of agricultural and applied economics in the Virginia Tech College of Agriculture and Life Sciences. He is the recipient of multiple national and university teaching awards and has taught micro- and macro-economics for over thirty years. He has taught classes of high school, undergraduate, and professional learners, and develops his curricula to incorporate current events and take a broad view of economics and how it impacts everyday life.
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