White House adviser says there could be zero economic growth if shutdown lingers

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A top economic adviser to President Donald Trump told CNN on Wednesday that the US economy may show no growth in the first quarter if the federal government shutdown lasts much longer.

White House Council of Economic Advisers Chairman Kevin Hassett said in an interview with CNN’s Poppy Harlow that he was not overly worried about the long-term effects of a government shutdown. But after Harlow asked him if the United States could wind up with zero GDP growth this quarter, he conceded that it was possible. “We could, yes,” he said.

But Hassett noted that the economy is typically weak in the first quarter because it follows a boom during the holidays. He argued that the economy would bounce back once the government reopens and any hit to GDP would eventually be recovered.

The second quarter could be “humongous” if the government shutdown ends before then, Hassett said.

Earlier this month, Hassett told PBS that furloughed government workers are “better off” because they didn’t need to take vacation days. But he said those comments were taken out of context.

He told CNN Wednesday that he and his staff were not being paid during the shutdown, and he noted that some government workers are having to take on other work to compensate for the loss in wages. He said one of his staffers was now driving for Uber.

The lack of a paycheck for federal employees is one reason why corporate executives are nervous about the shutdown.

The Business Roundtable, an organization representing many top CEOs, said Wednesday that “the shutdown is harming the U.S. economy and American workers, both federal employees and those in the private sector supporting government functions.”

“The shutdown is also preventing policymakers from focusing on solutions to create strong, sustained economic growth in America,” the Business Roundtable added in its statement.

No recession in 2020?

Hassett is more optimistic though. He told CNN he did not believe that credit rating agencies would downgrade US government debt — as Standard & Poor’s did in 2011 following a debate over raising the debt ceiling.

He conceded that “brinkmanship” was making investors nervous but he added that the US economy still looks strong.

To that end, Hassett said chances of the United States entering a recession in 2020 are “close to zero,” even though many economists are predicting a downturn by next year. He pointed to continued strong jobs gains as a healthy sign for the economy.

He also stuck to his forecast of about 3% growth for the US economy this year, despite concerns about the shutdown, China trade talks and a slowing global economy.

Hassett, who told CNN’s Harlow in an interview earlier this month that “a heck of a lot” of US companies will face challenges in China after Apple (AAPL) warned of slowing iPhone sales there, added Wednesday that the recent economic weakness in China could help lead to a long-lasting trade deal with the United States.

“I think the Chinese recognize that they’ve got a big potential gain because their growth has fallen off the cliff,” he said.

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