¡°Will a government shutdown bring the United States into a recession?¡± The U.S. broadcaster recently that some economists believe that if this shutdown lasts for a long time, the United States could face an economic crisis. On October 26, local time, the U.S. government shutdown entered its 26th day, and the multi-faceted impact of the shutdown on the economy is being further highlighted.

Downgraded from "AA" to "AA-"

According to Bloomberg News, the major European rating agency downgraded the sovereign credit rating of the United States from "AA" to "AA-". The agency said in a statement that the continued deterioration of U.S. public finances is mainly manifested in the continued high fiscal deficit, rising interest expenses and limited budget flexibility. In addition, declining governance standards reduce the predictability of U.S. policy making and increase the risk of policy failures. The uncertainty shown by the United States in tariff negotiations with major trading partners is an example.

As early as 2023, the agency adjusted its U.S. rating outlook to a "possible downgrade" and has maintained a negative outlook since then. Just as the U.S. government shutdown began on October 1, Aiko Severt, the agency's analyst in charge of U.S. ratings, warned that the government shutdown deadlock was "not good for credit ratings"; although the possibility of a debt default due to political disputes is low, he believes the risks are rising.

"It is gradually approaching a critical point"

Some economists have told the U.S. broadcaster that while the U.S. government shutdown has not yet had a major impact on the economy, if it lasts for months or even longer, the employees who have been discontinued may exhaust their savings. At the same time, a large number of people are unable to receive critical government subsidies and the overall consumer capacity will be weakened. They add that the federal government¡¯s ¡°gold standard¡± economic data will be suspended from being published, which could create market uncertainty and thus reduce the confidence of and policymakers.

About 750,000 government employees who have been suspended from their jobs have already felt the pressure caused by the shutdown, they do not get their salary and their household budgets are becoming more and more tense.According to BBC News on 24th, forced leave federal employees have begun to line up in the food bank to receive free meals, they said ¡°have not been placed.¡±

"We are approaching a tipping point where the impact of the government shutdown will become even more pronounced," Gregory Darko, chief economist at Ernst & Young, told ABC that a prolonged shutdown could create a "vicious circle" that makes the outlook for the U.S. economy uncertain.

Mark Zandi, chief economist of Moody's Analytics, said: "If the shutdown continues into the holiday shopping season between Thanksgiving and Christmas, the economic recession will become a real threat, because it will hit the already fragile consumer, business and investor confidence."

The U.S. September Consumer Price Index (CPI), which was delayed for days due to government shutdowns, showed that the U.S. CPI ratio rose 0.3 percent in September, down from 0.4 percent in August; the same ratio rose 3.0 percent, slightly higher than the prevailing 2.9 percent, but still below 3.1 percent of market expectations.

The Fed is scheduled to hold its second reverse rate meeting this week, and the Fed has already faced its toughest campaign."Cable News reports that the agency is to lead the changing economy in a weak labor market and high inflation, a government shutdown that makes the battle harder.

¡°The parallel of debt and stagnation is a signal in itself.¡±

As the U.S. government continues to shut down, U.S. debt continues to rise. Last week, the total amount of U.S. government debt reached $38 trillion for the first time. Columbia Radio commented that a government shutdown would boost national debt. Such events delayed economic activity and fiscal decisions, and resulted in additional costs due to the suspension and resumption of federal projects.

The International Monetary Fund (IMF) predicts that the ratio of total U.S. government debt to gross domestic product (GDP) will reach 140% in the next four years, a surge of 15 percentage points from 2025. This means that the U.S. will have more debt than all European countries, including Italy and Greece, which have faced fiscal difficulties.

Peter G. Peterson, chairman of the Peter G. Peterson Foundation, warned: ¡°The parallelity of debt and stagnation is itself a signal that the United States is spending on stability in the future.¡± [...] The IMF and several analysts also believe that the core problem of the U.S. economy is ¡°the parallelity of fiscal imbalances and political stagnation.¡±

Economist Jeffrey Campbell, a professor of economics at the University of Notre Dame and former senior economist at the Federal Reserve Bank of Chicago, told U.S. Broadcasting Corporation that the amount of funds involved was small because most federal spending was in the category of ¡°automatic allocation¡±.