U.S. Government Shutdown Worsens Economic Damage
U.S. Treasury Secretary Scott Bessent warned on Wednesday that the U.S. government shutdown has significantly impacted the economy, causing estimated production losses of about $15 billion per day. As the shutdown enters its second week, the economic costs are continually escalating.
Speaking at the annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington, Bessent stated that the shutdown is undermining market confidence, disrupting business investment plans, and causing ripple effects in the labor market. He noted that the ongoing shutdown affects not only federal agency operations but overall economic activity, particularly hindering growth in high-growth sectors such as technology and artificial intelligence.
Investment Boom Continues But Faces Policy Disruptions
Bessent believes that the current momentum of U.S. economic growth remains robust, especially in artificial intelligence, new energy, and high-end manufacturing, with investment activities remaining strong. He stated, "The wave of investment in the U.S. economy is still in its early stages and has sustainability. However, the government shutdown is becoming an obstacle to this process."
He pointed out that businesses and investors generally remain optimistic about the long-term outlook, viewing the tax cuts and industrial incentives pursued by Donald Trump's administration as unleashing economic potential. Yet, he also cautioned that if the shutdown continues, it will damage this confidence and could potentially curtail corporate capital spending in the short term.
Bessent likened the current U.S. economic environment to a "historic turning point," similar to the railroad expansion of the late 19th century or the internet boom of the 1990s—"growth waves driven by innovation and capital"—but also requiring policy stability as support.
Slight Improvement in Fiscal Deficit; Government Needs to Resume Operations
Regarding fiscal conditions, Bessent indicated that the U.S. fiscal deficit for the 2025 fiscal year is expected to be lower than the previous year's $1.833 trillion. Although he did not disclose specific figures, he anticipates that the deficit-to-GDP ratio could fall to about 3% in the coming years.
According to estimates released last week by the Congressional Budget Office (CBO), the fiscal 2025 deficit is projected at $1.817 trillion, slightly lower than the previous year. Bessent expressed optimism about this, stating that the deficit-to-GDP ratio has moved from the '4' to '5' level, and if the government resumes operations and strengthens budget control, the pressure on the deficit will continue to ease.
However, he emphasized that this prospect's realization relies on the government quickly emerging from the shutdown. "Without a functioning government, no fiscal planning can be implemented," Bessent stated plainly, adding that the ongoing political deadlock is weakening the fiscal department's ability to execute budgets and manage debt.
Political Divisions a Major Risk
Currently, the U.S. Congress is still mired in a deadlock over budget allocations and government spending plans. Bipartisan disagreements over federal spending limits, tax reform, and social security budgets have caused the shutdown to persist. Both the White House and the Treasury Department warn that if the shutdown continues into November, it could drag GDP down by 0.3 to 0.5 percentage points.
Economists point out that the government shutdown affects not only short-term economic activity but also has long-term negative effects on public investment projects, research plans, and public services. The U.S. Chamber of Commerce has warned that each additional week of the shutdown results in supply chain delays and increased business costs.
Economic Potential Needs Policy Support
In his remarks, Bessent urged Congress to quickly reach a compromise to resume government operations. He reiterated that the Trump administration's tax reforms and tariff policies have laid the foundation for manufacturing repatriation and innovation investment, but this growth potential requires policy consistency to ensure.
"We are in a time full of opportunities, but the government shutdown is a stumbling block," Bessent said. "If Congress cannot resolve the budget impasse, the U.S. will miss out on a historic economic growth opportunity."
