White House economic adviser Kevin Hassett has issued a dire warning that the ongoing government shutdown is inflicting economic damage far beyond initial estimates, potentially cutting fourth-quarter GDP growth in half. The 38-day shutdown, the longest in US history, is causing unprecedented strain on key sectors including travel, hotels, and construction. Hassett told Fox Business that the extended duration of the shutdown has led to significantly greater economic consequences than anticipated, with experts like Goldman Sachs projecting a potential 1% to 1.5% reduction in GDP growth for the October-December period.
Airlines across the country have already canceled approximately 700 flights at 40 major airports, following FAA-imposed flight reductions due to staffing shortages. These disruptions highlight the broader economic fallout of the shutdown, which is expected to have lasting impacts on the US economy. Hassett emphasized that the impact on the economy is far worse than previously expected because the shutdown has lasted so long. The repercussions of the shutdown could slice 1% to 1.5% from US GDP growth in the October-December period, according to recent estimates from Goldman Sachs.
He added that the travel and leisure sector is being heavily hit, warning that if the shutdown continues to affect air travel employees’ wages for “another week or two,” the sector could face “a near-term downturn.” The FAA has ordered a 4% reduction in flights on Friday, with cuts set to gradually rise to 10% by the same time next week if the shutdown continues. The situation underscores the far-reaching consequences of the shutdown, which is not only affecting daily operations but also potentially altering the trajectory of the US economy for the remainder of the year.