Aim higher, reach further.
  • Three Battles, Three Different Risks

    The latest budget fight in Washington is really three different conflicts coming together: a government shutdown, a default risk tied to a failure to raise the debt ceiling and another round of federal budget cuts known as the sequester. Two of them are modest (though still meaningful) risks to economic growth; one of them, a debt default, could devastate the economy. A rundown:

    Government Shutdown

    What happens: The federal government goes into a partial shutdown Tuesday unless Congress comes to an agreement before the current fiscal year ends. The government has a playbook (written into the law) for a shutdown, which has occurred 17 times before. It would send a substantial share of the non-security workforce home and disrupt services across the government. More than 800,000 federal workers would be furloughed, according to agency plans submitted to the White House. (The federal government has about 2.8 million civilian workers, or just over 2 million excluding the U.S. Postal Service.) Over at WashWire, see a detailed summary of how government services would be affected.

    Economic impact: The U.S. economy’s growth rate would be slowed by an annualized 0.15 percentage point per week of shutdown, according to economists at Morgan Stanley. (The economy grew at a 2.5% pace in the second quarter, according to the Commerce Department’s latest estimate.) Naturally, areas that rely on federal workers would be hit harder.

    Popular on WSJ