Government Shutdown Unlikely to Damage Economy, But Debt Limit Could be Catastrophe - The Washington Post

http://www.washingtonpost.com/business/economy/government-shutdown-wont-kill-economy-but-debt-ceiling-could-be-catastrophe/2013/10/07/06196142-2f6f-11e3-bbed-a8a60c601153_story.html

Ok, so my predictions about the government shutdown not happening were a little bit too optimistic. As you now probably know, the Federal Government did indeed shut last tuesday after Republicans refused to back down on defunding Obamacare, and Democrats refused to accept their demands. In the course of a week, 800,000 government workers were furloughed by the Federal Government as a direct result of the government shutdown, but essential services of the government will still be carried out. Now, with hundreds of thousands of government employees out of work (at least for the time being), and renewed uncertainty in the Federal Government, the economy is sure to take a hit in the coming weeks.

The government shutdown has already had a broad impact. National parks and museums still remain closed, which is hurting tourism, and will ultimately lead to a loss of revenue from potential foreign visitors to those sites. But more importantly, as I mentioned in my previous blog, investors are now losing confidence in the economy as a whole, and are beginning to sell stocks. This could have a global effect if world markets lose confidence in the United States' economy as well.

While the effects of the government shutdown have been very negative, if congress cannot agree to raise the debt ceiling by the upcoming deadline, the resulting impact on the economy will be far worse in comparison, as the Federal Government will not be allowed to borrow any more money to pay its bills. According to the article, the investment bank Goldman Sachs reports that if congress does not vote to raise the debt ceiling, our nation's GDP will be lowered by 4.2% over the course of a year. This is simply unacceptable. If Republicans and Democrats refuse to come to a compromise on raising the debt ceiling, then the economy could be damaged greatly because of their failure to do their jobs. While Republicans may argue that the national debt is too high and implementation of Obamacare will increase the deficit too much to allow the debt ceiling to be raised, failure to raise the debt ceiling will probably have far worse effects on the economy than a $16.7 trillion dollar deficit.