The shutdown of the U.S. federal government and a pending debt ceiling debate in Washington DC will create a month of uncertainty for B.C. exporters and companies with business south of the border.
The impact of the government shutdown will depend largely on how long it lasts. As a start, the US Capitol region would face the bulk of the economic impacts.
According to a Washington Post story, the D.C. area could lose $200 million a day because of the temporary loss of work by 60% of the region's government employees. The longer the shutdown lasts, the greater chance the impact would spread across the country, impacting everything from visa applications for foreigners to patient enrolments in U.S. clinical medical trials.
"All those people being furloughed for a period of time does have real consequences," Doug Porter, chief economist at BMO Capital Markets, told Business in Vancouver.
But the budget negotiations come at the same time the federal government has to deal with its government debt ceiling.
According to the US Treasury Department, the government will run out of money by October 17. In the past, both issues were dealt with at different times. But this year, the fear is that the polarized debate associated with the federal government spending authority will spill over into the debt ceiling negotiations.
"If they can't agree on a debt ceiling, the U.S. could be in technical default, which we've never seen a major industrialized country do and certainly not by choice," said Porter.
"The last time we went through a real showdown in the debt ceiling was in the summer of 2011 and it caused serious anxiety in the financial markets. The market has been kind of ignoring it, knowing its something down the road, but we've been getting close to the end of the road. This will be an issue over the next few weeks."
