One of President Donald Trump’s top advisers said on Wednesday that the partial government shutdown could suffocate the economy this quarter if it persists, leading to zero percent growth.
As the shutdown stretches into the 33rd day and roughly 800,000 federal employees are poised to miss a second paycheck, Kevin Hassett told CNN that the shutdown could contribute to a dramatic drop in gross domestic product growth.
Hassett, chairman of the Council of Economic Advisers, added that first quarters generally show a marked decrease in GDP growth compared with other quarters because of “residual seasonality,” which describes the decrease in growth after heightened end-of-year spending. But mixed with the shutdown, that growth can slow down as low as zero, he said.
“Could we get zero growth? I want to nail this down,” CNN’s Poppy Harlow asked Hassett.
“Yes. We could, yes,” Hassett responded. “If [the shutdown] extended for a whole quarter and given the fact that the first quarter tends to be low because of residual seasonality, then you could end up with a number close to zero in the first quarter.”
Still, Hassett said he was not too concerned the shutdown would have catastrophic effects on the economy. He said he did not believe the shutdown would lead to a downgrade in the United States’ credit rating and put the odds of a recession in 2020 at “very, very close to zero.”
Hassett added that the second quarter would see substantial growth if the government reopens by then and could regain much of the growth, even though government output remains lost for the quarter.
“The second quarter would be humongous if the government reopens,” Hassett said.
“If?” Harlow responded.
Hassett also responded to criticism he received after appearing to suggest in a “PBS News Hour” interview that federal workers were “better off” with the shutdown because they were essentially receiving a free vacation.
Hassett said Wednesday the quote was taken out of context and that he and his staff were feeling the effects of the shutdown personally. One staffer, he said, has resorted to driving Uber to make ends meet.
“Honest to goodness, they taped me for almost half an hour at the American Economic Association meetings and then held the interview until the day people didn’t get their checks and then played a quote really out of context to make it look like I don’t care about people who get their paychecks,” Hassett said. “This idea that I’m a cold-hearted person who doesn’t care at all like a Scrooge that people don’t get their checks is the kind of — it’s the kind of example of what’s wrong with the media.”
