As day three of the government shutdown continues, everyone is still wondering what effect this will have on the economy. Mark Zandi, chief economist, Moody’s, addressed this question today while appearing as part of the National Association of Homebuilders (NAHB) Fall Construction Forecast Webinar.
“If policyholders can get it together in the next few days then we are okay,” he says. “If they can’t and we go into next week the prospects don’t appear good … This becomes a real problem as the debt limit approaches on October 17 and stock and bond prices will start losing their mind. If they can’t get it together by October 17 we are toast and will go into a recession.”
He adds that even if Congress does raise the debt limit and fund the government they are still doing damage to the economy [by shutting down].
While those comments can be a major cause for concern, he followed it by up by saying, “When push comes to shove they [Congress] will sign on the bottom line and the fiscal drag will fade.”
The good news, adds Zandi, is the private sector is thriving.
“The private economy has done a marvelous job of getting their balance sheets in order,” he says. “In aggregate this segment is as good as I have ever seen it. They have implemented cost reductions and increased productivity.”
He adds that exports will be a strong source of global economic growth.
“We are in a pretty good place and hopefully Washington settles this soon and we will be off and running,” he adds.