Analysts warn uncertainty caused by political brinkmanship may spook consumers

JUDY WOODRUFF: Now more on the 16-day shutdown and its repercussions on the entire American economy and on the federal government itself.

For the latter, we turn to Sylvia Burwell, the director of the administration's Office of Management and Budget. I spoke with her a short while ago.

Sylvia Burwell, welcome to the NewsHour.

SYLVIA MATHEWS BURWELL, White House Office of Management and Budget: Thank you so much for having me, Judy.

JUDY WOODRUFF: So how smoothly did today go?

SYLVIA MATHEWS BURWELL: I think today went relatively smoothly. We haven't heard any hiccups.

And people were brought back to work and learned that they needed to come back, and are starting to bring the government back up as quickly and effectively as possible.

JUDY WOODRUFF: But 16-day shutdown, what are the challenges of getting the government back up and running or some of the government back up and running after something like this?

SYLVIA MATHEWS BURWELL: So, a number of challenges.

The first was making sure that employees knew. And I think you probably know that things went quite late last night, so making sure we had things in place so that government employees would be notified that the government would be up and running would be a starting one. Others have to do with actually things as simple as information technology and the use of handhelds and mobile devices and how those work after for 16 days not being used.

And then there comes some of the longer-term issues of, there's a lot of work that's backed up that people will need to focus on. For instance, during this time period, we had the end of the fiscal year. So just like any company, the government needs to close out its books. And so now we will have to come back, bring everybody in, and close out the books for the last fiscal year as, the same time, we're moving forward.

JUDY WOODRUFF: You — you had some people who were designated as essential, more, I think, than people expected. I think, in fact, most government employees were designated as essential.

How do you explain that? Does it give you sort of a new understanding of how the federal government work and what you would do the next time there's a shutdown?

SYLVIA MATHEWS BURWELL: So, the term that has developed over the period from 1995, even until now, is exempted employees.

And in terms of what is open in the government when there is a shutdown, there are two main categories. One is a category of people whose funding comes from sources other than the appropriations that we're talking about. And so that can be in the form of fees or other things.

The other category are exempted employees, and those are employees that are exempted to protect life and property usually. And so those are our military forces, and those are people that do checking of our food and food safety, and so those are some of the exempted categories.

JUDY WOODRUFF: So the fact that most people, most government employees were designated as essential, it — I guess it made — it made — there was just a question about I think that — that it wasn't everybody. If you're working for the federal government, why aren't you essential?

SYLVIA MATHEWS BURWELL: Well, I think that's part of why we like to use the word exempted.

And I think one of the things that has happened during this time of shutdown is there has come to be a realization of the many important functions that people serve in government, and whether that's helping people get their Small Business Administration loans to keep moving the economy forward and creating jobs or many of the other functions that I think people missed during this time when the government was down.

We have four — we actually have five Nobel Prize winners that work for the federal government, and four of those were on furlough.

JUDY WOODRUFF: I saw that.

For people who don't know how the federal government works, finally, Sylvia Burwell, how disruptive was this?

SYLVIA MATHEWS BURWELL: It was extremely disruptive, and I think anyone can imagine, when something is shut down and working in ways that it shouldn't be, every day, there are questions. There's application of law and new things happen, and you have to evolve.

For instance, when we heard about Tropical Storm Karen, FEMA needed to bring people back on in order that we would be ready to handle a storm if that storm had landed and caused damage. Another example of things going the other way is at one point in time, the veterans benefits team that — ran out of money, and so over 7,000 people were furloughed, even though they had not been furloughed initially.

And so it is an evolution and changing thing that every day because it's a very unnatural and damaging state.

JUDY WOODRUFF: Sylvia Burwell, the director of the Office of Management and Budget, thank you very much.


JUDY WOODRUFF: As for the shutdown's effects on the broader economy and the uncertainty that some see going forward, we check in with two economists who have been examining this, Beth Ann Bovino of Standard & Poor's and Mark Zandi of Moody's Analytics.

Welcome to you both.

So, Mark Zandi, to you first.

How has the broader economy been affected by all this?

MARK ZANDI, Moody's Analytics: Well, by my calculation, the shutdown and the brinksmanship over the debt limit shaved about a half-a-percentage point off GDP growth — that's the value of all the things that we produce — in the fourth quarter of this year.

The recovery continues, we're still growing, but because of these events, we're going to grow a lot more slowly, and we're still going to be very uncomfortable with the rate of growth that we're getting.

JUDY WOODRUFF: Beth Ann Bovino, what would you add to that to help people understand the effect on the economy overall?

BETH ANN BOVINO, Standard & Poor's: Well, I think I'm a little bit — I'm close, but a little more conservative on what I'm expecting. I'm looking for a, you know, about 0.6 percent or $24 billion in terms of the loss from the government shutdown.

There, though, I would add — I would add that one of the reasons why I'm a bit more concerned is that because even though we have had the shutdown, again, the politicians have to come back to the bargaining table in just a few months, and what's that key? Well, another shutdown or the risk of the debt ceiling not being increased as well.

All these things add more concerns, more worries, lingering lost confidence, and that's going to keep people from spending. And this is right during the Christmas holidays.

JUDY WOODRUFF: So, Mark Zandi, how much does that uncertainty about whether there's going to be another shutdown in a few months affect people's thinking and behavior?

MARK ZANDI: You know, I think this is very important. And I agree that the — because of the way the deal has been structured and the fact that this is — we're going to be in the middle of this again in the holiday season, into next year, that this is going to do continued — continuing damage.

And it's consumer confidence and their willingness and to go out and spend more aggressively, but, perhaps more importantly, it goes to businesspeople and their willingness to go out and hire more aggressively and to invest and really take those risks that are key to making our economy grow more quickly.

And, in my view, at this point, the key reason why this economy is not growing more quickly is because of the uncertainty created by what's going on in Washington. You know, every six months, we're back at this, and this is now starting to do a lot of damage. And I really don't think our economy can kick into that higher gear until Washington really addresses this issue and gets off the front pages of our newspapers.

JUDY WOODRUFF: Beth Ann Bovino, can you break it down by sectors to some extent? Tell us how you see housing, for example, hiring across the board, tourism, or break it down any way you want.

BETH ANN BOVINO: With no new government data, I can certainly try.

Let's see. I mean, we can start looking at the number of employees that were furloughed without pay. And then you would add to that — I mean, I know it was 800,000 at once, but it was brought down to a little bit less than that. But then you would add all the essential workers, including a friend of mine, who was working without pay, and, of course, the contract workers as well. Well, that means those people, they do get their paychecks, but I think because of the heightened uncertainty going forward, they might be a little bit reluctant to actually spend that back pay.

You add tourism. Tourism, then, of course, you have got all the shutdown of monuments and also of national parks. Well, that means that's lost tourist revenue. That goes into GDP and that's no longer available. I believe Sylvia from — had mentioned earlier that you're looking at what happens with all those businesses that wanted to have loans.

Small Business Association was down to bare-bones, and so was the Agricultural Department. That meant that farmer loans, small business loans weren't getting out, and that means those loans were really what kind of drives this economy, and it keeps things slow.

JUDY WOODRUFF: And, Mark Zandi, are these things that can bounce back now that the shutdown is behind us? Or is the damage longer-lasting?

MARK ZANDI: Well, we will get some of this back. You know, the Small Business Administration will get up and running and make those loans. The folks that are trying to import and export goods will get their permits and be able to do that.

The mortgage lenders will ramp it back up again. So, we will — and, of course, the furloughed workers are going to come back. They're going to get paid, and they're going to start spending on the things that they didn't spend on during this period. So we will get some of it back. But we're not going to get all of it back.

And, more importantly, if lawmakers take us down this very dark road again early next year, I fear it's going to undermine consumer confidence and business confidence and perhaps even investor confidence, to the degree that it's going to start doing even more damage, real damage, and we're not going to bounce back from that.

JUDY WOODRUFF: There was a bit of a scare a few days ago, Beth Ann Bovino, when Fitch's rating service announced they were putting the U.S. credit rating on a watch, I believe they called it. Does something like that have a lingering effect?

BETH ANN BOVINO: Well, I would say that one of the — one of the — I think one of the issues, largely coming from the debt ceiling debates, that — what's on top of the shutdown — all those two combined, it's certainly going to hit confidence.

You saw — you certainly saw banks interest rates kind of on the — not near-short, but kind of maybe three months, six months. They're still rather high, and they were high during the week. That meant that borrowing costs are up for investors. That's a drag on the economy. In terms of questions of whether there will be another downgrade, of course, I'm not a sovereign — I'm an economist, not a sovereigns rating analyst, but that certainly is going to kind of weigh on investors' moods.

JUDY WOODRUFF: Finally, Mark Zandi, what do you look for in the weeks to come to see whether the economy is coming back, getting back to the state that it was before all this started to happen?

MARK ZANDI: You know, Judy, for me it's about jobs. I think we have got to watch these jobs reports.

I just picked up an e-mail just before we had started our conversation. It looks like the Bureau of Labor Statistics is going to release September job numbers next week, and then the October numbers a couple of weeks down the road. That's very, very important. If businesses stopped hiring or even started laying off, and job growth slowed substantively, then what happened in Washington about did a lot more damage.

If businesses held tough, then I think we will be OK. But it's really quite critical at this point that lawmakers get it together, because, if they don't, at some point, businesses are going to start — stop hiring people and laying off workers, and we're not going to bounce back.

JUDY WOODRUFF: Mark Zandi, Moody's Analytics, Beth Ann Bovino, Standard & Poor's, thank you both.

MARK ZANDI: Thank you.