Kevin Hassett says US economic growth could near 0% in 1Q if shutdown continues

If the prolonged partial government shutdown extends for the whole first quarter of 2019, it’s possible that U.S. economic growth will be “very close” to zero percent, according to Kevin Hassett, chair of the Council of Economic Advisers.

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“Given the fact that the first quarter tends to be low because of residual seasonality, then you could end up with a number very close to zero in the first quarter,” he said Wednesday during an interview on CNN, adding, “But then again the second quarter number would be humongous if the government reopened. It would be like 4 percent or 5 percent.”

Last week, the White House doubled its estimate of the economic effects of the shutdown. The Trump administration initially forecast the partial shutdown would subtract about 0.1 percentage point from growth every two weeks, but later said it was forecasting about 0.13 percent point per week as a result of additional losses from private contractors.

Based on that estimate, if the shutdown lasts an entire quarter, that means the White House anticipates that GDP would shrink by about 1.69 percent. GDPNow, an up-to-date tracker monitored by the Federal Reserve Bank of Atlanta, is estimating fourth-quarter growth of 2.8 percent, as of Jan. 16.

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The shutdown, which began on Dec. 22, dragged into its 33rd day on Wednesday, with no apparent end in sight.

Although congressional leaders and President Trump remain at an impasse over border wall funding, the Democratic House and Republican Senate will both vote this week on strikingly different bills to fund the government. Neither is expected to pass.