Shutdown Could Prompt Zero Growth: White House Economist

WASHINGTON - The White House's top economist on Wednesday said the economy could completely stall in the first three months of 2019 if the government shutdown does not end, drawing a sharp contrast with the rosy economic picture President Donald Trump has tried to paint during the monthlong funding lapse.

Kevin Hassett, chairman of the White House Council of Economic Advisers, was asked in a CNN interview if the economy's growth rate for the first quarter of the year could fall to 0 percent if policymakers don't step in soon.

"Yes, we could" see that, he said. "If it extended for the whole quarter, and given the fact that the first quarter (growth rate) tends to be low because of residual seasonality, then you could end up with a number very close to zero in the first quarter."

It represented the most dire forecast yet from a Trump administration official on the shutdown's economic toll.

The U.S. economy rarely stalls or contracts, and a growth rate of 0 percent would be a sharp fall from its performance last year.

Trump has pushed his aides to pursue policies that grow the economy by 3 percent or 4 percent per year, and the economy is expected to have grown by close to 3 percent in 2018, in part because of tax cuts and spending increases advocated by the White House.

In a Twitter post on Tuesday, Trump wrote that "The United States has a great economic story to tell. Number one in the World, by far!"

The United States has long been the largest economy in the world, though it's unclear what precise calculation he was referring to in his post.

White House officials say the partial government shutdown is stripping away roughly 0.1 percent of economic growth per week. Growth for the first quarter was already projected to be low, at below 2 percent, which is how Hassett said he came to his conclusion.

Trump has mostly eschewed economic advice from lawmakers and experts, saying instead he prefers to follow his instincts on how best to proceed. Trump ushered in the government shutdown to begin last month after rejecting a bipartisan spending bill, insisting that Congress must appropriate $5.7 billion to erect sections of a wall along the U.S.-Mexico border.

During his campaign and earlier in his presidency, Trump repeatedly promised Mexico would pay for the wall.

The shutdown has forced government spending to halt for a number of projects, and it has stopped paying roughly 800,000 federal workers. Those workers, in turn, have had to cut their own budgets.

And there are also thousands of government contractors who are also not being paid, and those businesses are also having to adjust their spending.

On top of this, the University of Michigan recently reported that consumer confidence has fallen to its lowest level of Trump's presidency. Housing sales have also begun to slump, in a sign that economic anxiety is spreading.

Hassett also predicted that reopening the government would lead to a "humongous" growth rate in the second quarter, though Trump has said he would be happy to keep the government shut down for months or years.

Meanwhile, White House acting chief of staff Mick Mulvaney has pressed agency leaders to provide him with a list, by Friday, of the highest-impact programs that will be jeopardized if the shutdown continues into March and April, people familiar with the directive said.

The request is the first known inquiry from a top White House official seeking information about the spreading impact of the shutdown

The people spoke on the condition of anonymity because they were not authorized to disclose Mulvaney's demand.

Credit: By Damian Paletta - The Washington Post

Caption: White House economist Kevin Hassett said the economy could completely stall in the first quarter of 2019.

Jacquelyn Martin/AP