By Congress has a mere three days left to devise a plan that will steer the government clear of a shutdown come Sunday, but according to Jan Hatzius, Goldman Sachs’ esteemed chief economist, the likelihood of that happening is slim. Hatzius estimates that there is a 90% chance the government will indeed be shutting down on October 1, and anticipates that this deadlock could persist for a period of two to three weeks. As political positions harden, Hatzius highlights that prospects for a swift resolution are becoming increasingly unlikely.
Goldman Sachs’ team of economists assert that political pressure will intensify as the looming pay dates for active-duty military personnel on October 13 and November 1 draw near. Essential operations, such as airport security screenings and border patrol, may also face the repercussions of a potential deterioration as employees go unpaid during the shutdown.
The White House has declared that service members will continue working without receiving pay, including the 1.3 million active-duty troops within its ranks. Meanwhile, hundreds of thousands of civilian Defense Department workers will face furloughs. Hatzius warns that forcing the military to work without compensation could prove unpopular with voters, potentially leading to negative consequences for the political party held responsible.
The Potential Impact of a Shutdown on the Aviation Industry
A Challenging Situation for Air-Travel Professionals
The potential consequences of a government shutdown extend beyond just federal employees. Over 13,000 air-traffic controllers, more than 50,000 Transportation Security Administration officers, and numerous Federal Aviation Administration employees would also be affected, working without pay.
During the previous government shutdown in 2018-2019, this situation resulted in an increase in absences and resignations among these professionals. As a result, travel delays and airport terminal closures became a reality, causing inconvenience and frustration for passengers.
A Potential Solution: The Discharge Petition
According to Hatzius, there is a way for Congress to navigate a shutdown. He highlights a rule that allows a “discharge petition” to be signed by a majority of the House. This action bypasses the Speaker and enables a bill to be brought to a vote. However, this approach requires more time than lawmakers currently have before the deadline, making it unlikely to prevent a shutdown. Nevertheless, if a shutdown occurs and political pressure mounts, utilizing a discharge petition may become a viable means to end the impasse.
Economic Consequences
Goldman Sachs estimates that each week of a shutdown would diminish fourth-quarter gross domestic product by 0.2 percentage points. The impact would persist into the first quarter of 2024 if it were to last that long, assuming it is resolved by then. Additionally, both federal employees and the private sector would suffer negative repercussions.
Furthermore, even if the shutdown concludes within two or three weeks, Goldman Sachs warns that future shutdowns are possible. The spending proposals put forth by the two parties remain significantly divergent, making it difficult to find common ground. Any agreement to reopen the government would likely have a predetermined expiration date before the year’s end, increasing the risk of another funding lapse.
As the deadline approaches, the aviation industry remains on edge, hoping for a resolution to avoid further disruption and economic harm.
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