Goolsebee: The U.S. Can Withstand a U.K. Recession

During an interview on the FOX Business Network’s Mornings with Maria, former economic advisor to President Obama Austan Goolsebee reacted to the U.K.’s historic vote to leave the European Union.

“We just heard a very loud crash from the attic and you don’t exactly know what is going to be broken up there, but you know there’s going to be something broken,” said Goolsebee.

Early Friday morning, U.K. Prime Minister David Cameron announced he would be resigning in October, but Goolsebee thinks he could be gone sooner.

“I don’t believe Cameron is going to make it to October. I think that’s a fantasy. I think he’ll be gone in short order,” he said.

He also explained how the decision will create a trickle effect throughout Europe.

“I think this likely harkens the end of the Eurozone. The U.K., while not having the euro, had some of the milder immigration and some of the milder costs of trying to hold Europe together and I think a lot of the other countries in Europe are going to have their own referendum and bail out,” he said.

When it comes to trade between the U.K. and EU, Goolsebee says they will eventually come up with “some kind of trade agreement,” but expects uncertainty to create headwinds for their economy.

“They are very likely to run up again and again on a series of details where they say, well wait a minute do you have a banking license in France now? Or do I have to go back? Do I have to get a special stamp on my visa and you’ve seen the market reaction, I think they are highly likely to go into a recession in the short run as they deal with that,” he said

Even though the U.S. is a strong trading partner with the U.K., Goolsebee says unless there’s a global meltdown, the U.S. would be able to withstand a U.K. recession.

“The U.K. is a great ally -- the special relationship, it’s not a very big part of the U.S. economy… If there’s a full blown meltdown in Europe, look, make no doubt about it, in the U.K. they had a temper tantrum, they kind of pitched a fit, and they broke some things. Now, it’s the other guy, they punched their little brother in the face, now the little brother is going to have a temper tantrum and it’s going to be Europe’s turn to start smashing some things. If Europe has a full-blown meltdown that will definitely affect the U.S. in a negative way,” he said.