Two of my colleagues have comments on the government shutdown (for more comments from University of Oregon faculty from other departments, see here -- more comments should be added over the next few days):

Tim Duy

Professor of practice and senior director of the Oregon Economic Forum

UO Department of Economics

A protracted shutdown creates another headwind to an economy still struggling to regain ground lost during the last recession. Moody's Analytics, for example, estimates that a month-long shutdown would cost the U.S. economy $55 billion. As a result, we will see only slower resolution of pressing problems such as the crisis in long-term unemployment or stagnant median income growth for households. Moreover, the possibility of default on U.S. debt payments threatens the stability of the financial system at its core and could trigger a crisis that leads to another recession, pushing the economy back deeper into the hole. No faction in Congress should find it acceptable to hold the American economy hostage like this for any reason.

George W. Evans

John B. Hamacher Chair of Economics

UO Department of Economics

The partial government shutdown will operate as a perverse fiscal policy, adding negative pressure to a tepid recovery. The reduction in government spending will directly and indirectly act to reduce GDP and employment in the US, with spillover effects on Europe and the rest of the world. Given the weakness of the recovery in the U.S., this is a dangerous “policy.” The chairman of the Federal Reserve has made it clear that there are some adverse fiscal shocks that it may not be possible to offset with monetary policy. A failure to increase the debt limit would additionally test those limits, because it would make conceivable the possibility of default on U.S. federal government obligations, and because default risk would lead to higher interest rates. Both the partial government shutdown, if it continues for a significant length of time, and a failure to increase the debt limit, would increase the probability that the U.S. economy returns to recession. The House of Representatives should immediately pass a “clean” continuing resolution, to end the partial shutdown, and vote a “no strings” increase in the debt limit.