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A Primer on the Current Government Shutdown

Jeffrey Frankel

Wednesday is Day Two of the government shutdown and with no potential deal on the horizon, Americans have to start thinking about the consequences. Since the start of the shutdown on Tuesday, 800,000 federal employees are now out of work and that means National Parks, federal prosecutors, and other government agencies are either closed or have scaled back their operations. Back here at home, federal public defenders in West Texas have pledged to continue to work despite not getting paid.

Reporter Lorne Matalon talks to Jeffrey Frankel, a former member of the Council of Economics Advisers during the Clinton administration, about the possible impact of the shutdown.

Interview highlights:

On possible ways the Obama administration could mitigate the effects of the shutdown:
 They have already done whatever they can to mitigate it...They've already had special exceptions so that the men and women in the armed forces are going to keep receiving their paycheck and Social Security recipients will keep receiving their benefits.
On the impact on the general economy:

We won't notice a plunge of the economy in terms of GDP [gross domestic product], unemployment and the national statistics...

It will affect people right away, certainly many people who work for the government or works for someone who works for the government...

We probably all interact with the government and depend on it in ways we don't visualize.

On the risk to the credit worthiness of the United States:
I think at some point, where this is all ending...if it's not fixed, the financial markets will react very adversely. They've been assuming that Washington is up to its old tricks and sooner or later, at the last minute, it'll be solved but if it isn't...that's where we're ending up with a severe negative effect on the financial markets.
Jeffrey Frankel is the James W. Harpel Professor of Capital Formation and Growth at Harvard's Kennedy School of Government. He was a former member of the Council of Economics Advisers in the Clinton administration.