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HomeLatest NewsJanet Yellen warns of government shutdown's recession risk in the U.S.: NPR

Janet Yellen warns of government shutdown’s recession risk in the U.S.: NPR

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Treasury Secretary Janet Yellen is warning about the potential damage a government shutdown could inflict on the U.S. economy. She voiced her concerns in an interview with NPR, stating that a shutdown could impose immediate and escalating harm on the economy, potentially pushing it into a recession. Yellen highlighted the impact such an event could have on the confidence of businesses and consumers, emphasizing the psychological toll it might take if political paralysis continues. She pointed out that the current situation is distinct because a small group of Republicans in the House are holding a continuing resolution hostage, causing significant damage to the American people and economy.

Yellen’s remarks come as the possibility of a government shutdown looms once again. The economic consequences of a shutdown depend largely on its duration. The last one, which occurred in 2018 and 2019, lasted over a month and resulted in a reduction of quarterly annualized economic growth by 0.1 to 0.2 percentage points each week. Yellen revealed that the Treasury Department has already begun preparations for a potential shutdown, anticipating that the majority of workers in the department would be furloughed. As a seasoned government policymaker, Yellen expressed her concern about the severity of this particular situation, attributing it to the actions of a small, extreme faction within the Republican party.

Yellen’s warning underscores the heightened risks and uncertainties facing the U.S. economy. With Federal Reserve Chair Jerome Powell also acknowledging a potential shutdown as one of the headwinds, policymakers are grappling with the dual challenges of managing inflation and navigating political hurdles. The longer the government remains in shutdown mode, the greater the negative impact on economic growth and public sentiment, potentially eroding the confidence of businesses and consumers alike. As the Treasury Department prepares for the worst-case scenario, government officials and lawmakers must urgently find a solution to avert a shutdown and ensure the stability and health of the American economy.

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