DAVID GREENE, HOST:
As we've been reporting elsewhere in the program, the partial shutdown of the U.S. government began overnight and that will continue until Congress can agree on a budget. This morning, the financial markets reacted largely with indifference. The Dow, the NASDAQ and S&P indexes are were up slightly in trading.
Now to learn more about the potential economic impact of a partial federal government shutdown, we brought in NPR's Jim Zarroli. Jim, thanks for joining us.
JIM ZARROLI, BYLINE: Good morning.
GREENE: So the fiscal year started overnight without a federal budget. Give us the broader sense here. How does this link up with the broader economy?
ZARROLI: I don't think most businesses are going to be directly affected. And I think you can expect the, you know, the world of commerce to go on pretty much as normal. I mean, banks are going to operate. Financial markets are still going to be working. A lot of financial regulators like the SEC will stay open. There are businesses that will take a more direct hit, of course. Some of them like government contractors, especially defense companies.
But I think the thing that you have to remember is that the federal government employs a lot of people. It employs 2.1 million people. And the estimate is that about 800,000 or a little bit more than a third are going to be without paychecks. And that's a pretty significant number of people in terms of the broader economy. I mean, you're going to see, you know, people at NASA and the IRS suddenly not getting paychecks. And that matters. Now the last time the government shut down, which was 1995, you had federal workers not getting paid, but they got paid retroactively. We don't know whether that's going to happen this time.
GREENE: And so Jim, are all these workers not getting paychecks, you're talking about the so-called nonessential employees who will actually be out of work during the shutdown.
ZARROLI: Right. I mean, the nonessential. But from the point of view of the economy, it sort of doesn't matter if they're essential or nonessential. What matters is that they're not going to be earning paychecks. I mean, that is important to broader growth. Macroeconomic Advisers, which is a very well-respected forecasting firm in St. Louis, has said that if this shutdown goes on for as long as two weeks, it could shave three-tenths of a percentage point off economic growth in the fourth quarter. And so, you know, we're going to see an impact.
GREENE: And I suppose this is not an economy that is doing all that well right now, which I would imagine, makes it a bit more vulnerable.
ZARROLI: Right. It's an underperforming economy. We still have a lot of unemployment and underemployment. And in a better economy, we might be able to absorb this blow. But in an economy like this one, that kind of effect on growth matters.
GREENE: And groups here in Washington who are worried about the economy and the business climate, Jim, like the U.S. Chamber of Commerce comes to mind, what is their message to Congress through all this?
ZARROLI: Well, they have been very active trying to pressure Washington to get some kind of deal done. In the end, that could have a significant impact on what happens. I mean, the Republican Party after all, is supposed to be the party of business. And so it will be may be a little bit more difficult for the party to disregard their views.
And what they're upset about isn't just the government shutdown. I mean, if Congress doesn't raise the debt ceiling, suddenly the Treasury Department doesn't have the money to pay the government's bills. You know, Treasury Department has said that that could happen by October 17th. If the federal government defaults on its debts, that would just be a real catastrophe, not just for the U.S. economy but all over the world because markets all over the world depend on U.S. Treasury debt. Now it's not clear that's going to happen. But just the idea that we haven't been able to get this resolved so far has made a lot of investors nervous.
GREENE: And we should say debt ceiling; two words we're going to hear a lot about in the coming days and weeks. That's the next big battle in Congress, whether to raise the debt ceiling.
Jim Zarroli, joining us from New York, thanks so much.
ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.
