UofSC economist says government shutdown likely won’t happen at the end of the week

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COLUMBIA, SC (WIS) – A University of South Carolina economist has said the federal government is unlikely to close at midnight on Friday, when Congress must reach an agreement on funding to keep it open.

Beyond that, lawmakers face another looming deadline to raise the debt ceiling.

Joseph Von Nessen, a research economist at UofSC’s Darla Moore School of Business, said he was optimistic members of Congress would be able to come to agreements on both of these issues.

“Both sides of the political aisle agree that the debt ceiling needs to be raised, so that’s a good thing because it means everyone involved has an incentive to make sure this is resolved,” he said. -he declares.

But so far both sides have failed to do so.

Friday’s deadline comes as the federal government begins a new fiscal year on October 1. If a shutdown occurs, some government programs could be suspended and hundreds of thousands of federal workers could be on leave, thousands of them in South Carolina. The last time the federal government partially closed its doors, end of 2018, about 3,600 federal employees in South Carolina went without a paycheck for the duration of the 35-day shutdown, although the government paid back wages after it reopened.

The South Carolina Small Business Chamber of Commerce said failure to address this issue could harm the state and local economies.

“If we have a shutdown and we have thousands of people out of work, maybe for a long time, they won’t go to the restaurant,” said President and CEO Frank Knapp. “They’re going to hold back what they buy. They’re going to spend less money on Main Street, and that’s what’s hurting small businesses.

Monday night, Senate Republicans blocked a proposal it would have solved both problems – raising the debt ceiling and funding the government until December to end the shutdown – claiming that only Democrats should be the ones raising the debt ceiling and that they could do it without Republican votes.

The next day, Treasury Secretary Janet Yellen sent a letter to Democratic House Speaker Nancy Pelosi, writing that the Treasury “would be with very limited resources that would quickly run out” if Congress did not suspend or raise the debt ceiling by October 18, less than three weeks.

Von Nessen said the debt limit needs to be raised so the government can pay its bills and fund the programs and obligations it already has, such as Social Security.

“If the problem is not resolved, even for a very short period of time, it could have practical consequences as we will see, probably see financial markets a little shaken, consumer and business confidence could take a hit, and from a practical, field perspective, what you would see every day are the short-term borrowing costs that are likely to rise in terms of interest rates, and of course, whether businesses need to ‘accessing financial capital or if consumers are looking to borrow money to make a big purchase, it would have an impact on them, ”said Von Nessen.

Democratic leaders have vowed they will not allow the government shutdown, which could result in separate votes on the two issues at different times and potentially without bipartisan support.

Von Nessen believes lawmakers on both sides of the aisle don’t want a stop or default to happen, especially now.

“They both recognize that this economic recovery that we have experienced throughout the year as we recover from the COVID pandemic has been very strong for the United States and South Carolina, but it is also very fragile, and therefore we want to make sure that we do nothing to derail the momentum of the recovery that we have seen, ”he said.

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