The White House’s top economist on Wednesday said the economy could completely stall in the first three months of 2019 if the government shutdown does not end, drawing a sharp contrast with the rosy economic picture President Trump has tried to paint during the month-long funding lapse.
White House Council of Economic Advisers Chairman Kevin Hassett, in a CNN interview, was asked whether the economy’s growth rate for the first quarter of the year could fall to 0 percent if policymakers don’t step in soon.
“Yes, we could” see that, he said. “If it extended for the whole quarter, and given the fact that the first quarter [growth rate] tends to be low because of residual seasonality, then you could end up with a number very close to zero in the first quarter.”
It represented the most dire forecast yet from a Trump administration official on the shutdown’s economic toll.
The U.S. economy rarely stalls or contracts, and a growth rate of 0 percent would be a sharp fall from its performance last year.
Trump has pushed his aides to pursue policies that grow the economy by 3 percent or 4 percent per year, and the economy is expected to have grown by close to 3 percent in 2018, in part because of tax cuts and spending increases advocated by the White House.
In a Twitter post on Tuesday, Trump wrote that “the United States has a great economic story to tell. Number one in the World, by far!”
The United States has long been the largest economy in the world, though it’s unclear what precise calculation he was referring to in his post.
White House officials say the partial government shutdown is stripping away roughly 0.1 percent of economic growth per week. Growth for the first quarter was already projected to be low, under 2 percent, which is how Hassett said he came to his conclusion.
Trump has mostly eschewed economic advice from lawmakers and experts, saying he instead prefers to follow his instincts on how best to proceed. Trump ushered in the government shutdown that began last month after rejecting a bipartisan spending bill, insisting that Congress must appropriate $5.7 billion to erect sections of a wall along the U.S.-Mexico border.
During his campaign and earlier in his presidency, Trump repeatedly promised that Mexico would pay for the wall.
The shutdown has forced federal spending to halt for a number of projects, and the government has stopped paying roughly 800,000 federal workers. Those workers, in turn, have had to cut their own budgets.
There are also thousands of government contractors who are not being paid, and those businesses are having to adjust their spending. On top of this, the University of Michigan recently reported that consumer confidence has fallen to its lowest level of Trump’s presidency. Housing sales have also begun to slump, a sign that economic anxiety is spreading.
Hassett predicted that reopening the government would lead to a “humongous” growth rate in the second quarter, though Trump has said he would be happy to keep the government shut down for months or years.