Principles of Macroeconomics

Assignment (1)

In terms of rules foremost up to the respective shutdowns, the reasons

behind the 2013 shutdown say far worse about politicians than those of 1995. In
1995 the shutdown appeared to be an argument on the actual budget, and the
notion of cooperation wasn't a stranger to either party. However, in 2013 an entire
political party was ready to just allow the government to default in the confidences
of removing a single piece of legislation that has some implication to the budget.

This Shutdown Is Not the same as 1995 and 1996 its WorseAll the
reasons behind 2013 shut down is because of Obamacare." The Reasonable Care
Act is the center of the problem at this time, and it would take an army of angry,
Democrats with strategy tactics attempt to defund the law. This inventiveness of
using Obamacare as a bargaining chip to avoid a government shutdown is was
spearheaded by Senator Ted Cruz (R-Texas). As of October 1, officially the US
GOVERNMENT entered a government shutdown for have no planned budget for
the new fiscal year. As President Obama and Speaker Boehner go at it with their
respective rhetoric, many federal labors have been with no wage.

ON DECEMBER 2013, 800,000 federal workers were as non-essential

members of the workforce. At the rate of two weeks since the government shut
down, would lead to a 0.3% drop in the national GDP when the numbers are
looked at annually, or a whopping $300 million in national GDP per day.
Relatively, at first this doesn't seem like much, but if the government is shut down
for a greater period of time, the economic impact in the future gets worse. The
predictions have come fast and furious. The shutdown costs $300 million in lost
gross domestic product per day, according to IHS Global Insight. Economists
surveyed by Bloomberg said a one-week shutdown would reduce fourth quarter
GDP growth by .1 percent. Macroeconomic Advisers, one of the most sober and
best forecasters, said a two-week shutdown could shave .3 percent off the fourth
quarter. AND one-month shutdown could decrease fourth-quarter growing by
anywhere from 5.0 % to 2.0 %. The government has legislative ongoing that would
recompense some furloughed workers,

Even though might see some sort of beneficial economic growth as a consequence
of the shutdown, those effects will be short-lived. The long-term repercussions still
lie ahead regarding annualized GDP amounts lost.
The effects in economy in us government shut down ,some manufacturers the
government has hired experienced disruptions as the shutdown prevented those
companies from delivering goods and receiving payments for work already done.
United Technologies announced that if the shutdown was not resolved by October
7, it would furlough 2,000 employees at a military helicopter manufacturing
subsidiary, Sikorsky Aircraft. Another 2,000 United Technologies employees
would have been furloughed if the shutdown lasted beyond October 14 and an
additional 1,000 if the shutdown lasted into November. Another United
Technologies subsidiary, Pratt & Whitney, a manufacturer of aircraft engines, was
also affected. The Sikorsky and Pratt & Whitney factories require civilian
employees from the Defense Contract Management Agency to approve their
products before they can be delivered to the government. Those Defense
Department employees were furloughed Similarly, Lockheed Martin announced
plans to furlough 3,000 employees on October 7. Those employees work at
government facilities or require government inspectors to complete their jobs.
Lockheed said that the number of employees furloughed would increase if the
shutdown continued
Small businesses are facing delays in receiving loans from the Small Business
Administration. Many of these companies may need to turn to alternative funding
sources that charge much higher interest rates. One alternative source of credit,
merchant cash advances, charge interest rates of between 40% and 100%.
Estimated that a shutdown of three to four weeks would cost the economy about
$55 billion. Lost wages of Federal employees will amount to about $1 billion a
week. Goldman Sachs estimated that a three-week shutdown would reduce the
Gross Domestic Product of the United States by 0.9%.According to the Los
Angeles Times, a two-week shutdown would reduce GDP growth in the fourth
quarter by 0.3 to 0.4 percentage points. By comparison, the GDP has grown by less
than 2% in 2013.
The negative economic effect of the shutdown will be particularly severe in the
Washington D.C. metropolitan area. Approximately 700,000 D.C. area jobs could

be affected at a cost of $200 million a day. The State of Maryland predicted that it
would lose approximately $5 million a day in tax revenue.
Local communities across the country are also seeing a significant negative
economic effect, particularly those communities that are heavily dependent on the
Federal government. A press release from the National Park Service said the
shutdown of national parks would result in losses of $76 million a day in tourismrelated sales among local communities, but during the government shutdown the
National Park Service website was unavailable. During the month of October,
tourists spend about $2.7 million a day at the Grand Canyon National Park and
other National Parks in Arizona. Xanterra Parks and Resorts, a concessioner which
operates hotels, restaurants and other visitor services in 21 national parks, reported
that it was losing $1 million in revenue each day because the parks have closed.
Several owners of tourist-oriented businesses located near national parks told NBC
News that they were experiencing cancellations and declines in traffic that
threatened their livelihoods. Julie Fox, a cafe owner in Moab, Utah (outside Arches
National Park) said "Twenty percent of my yearly income comes from October and
May. If it's anything like last time 21 days I'll lay off eight out of twelve
people. It'll be like the dead of winter here.
Because of this issue hundreds of thousands of workers were laid off, businesses
have been hurt, and the standing of US credit in the eyes of world was severely
impacted.
On the other hand, the standard & Poors says that the shutdown has cost the US
economy $@$bn, shaving 0.6% off of economic growth this quarter. And investors
have not happy particularly foreign nations like china which owns US debt.
However, markets have not responded as sharply as they did throughout prior
budget negotiations, chiefly during the 2011 debt ceiling negotiations that saw yet
another last-minute deal.
Traders at the NYSE think the economic impact of a shutdown will be minimal
Overall, US stocks are up 18% for the year.
The business community remains focused on other concerns, like when the Federal
Reserve will begin to ease off its extraordinary efforts to prop up the US economy
- something the central bank says will not happen any time soon, partially due to
Washington dysfunction.

"They're going to eventually get to a compromise and then we'll move on," O'Neil
Securities trader Kenny Polcari told the BBC from the floor of the New York
Stock Exchange.

REFRENCESS:
1.
2.
3.
4.
5.

Espo, David (September 30, 2013). "Republican Unity Frays As Government Shutdown Looms".
www.wikipedia.com
United States Congress. Retrieved September 23, 2013.
www.Abcnews.com
"Government Near Broad Shutdown in Budget Impasse". The New York Times. Retrieved
September 30, 2013.
6. http://www.bbc.com/news/business-24341406