Shutdown would stunt economic growth, business leaders warn

Obama issues veto threat over union measure in FAA bill

A government shutdown would have a negative impact on the U.S. economy and could sweep away the recovery’s momentum, business leaders warned Wednesday. 

Officials from the Business Roundtable offered the warning during a press call highlighting the group’s first-quarter CEO survey, which paints a positive outlook for the economy’s future. 

The survey of BRT members, who account for $6 trillion in annual revenues, forecast increased sales and hiring by businesses over the next six months. The report pointed to rising confidence among business leaders that the U.S. economic recovery is moving ahead at full steam. 

Ivan Seidenberg, the business group’s chairman, said even a short shutdown would put this prospect at risk. 

“I don’t think any of the CEOs would welcome a government shutdown,” said Seidenberg, also the CEO and chairman of Verizon Communications. 

CEOs surveyed for Wednesday’s report were not asked to anticipate a shutdown, and Seidenberg warned the positive results would “need to be cast aside” if there were a government shutdown. 

Both parties say they want to avoid a shutdown, and Republicans and Democrats took a step toward avoiding one on Wednesday when Speaker John Boehner (R-Ohio) asked staff on the House Appropriations Committee to begin negotiations with their Senate counterparts. 

The move was seen as a signal that Republicans and Democrats had agreed on a top-line number for the spending cuts, since House Appropriations Chairman Hal Rodgers (R-Ky.) had said the discussions would only take place with such an agreement. 

Republicans want to cut $61 billion in spending, while Democrats this week signaled a new offer that would include $30 billion in cuts. 

GOP leaders in the House face intense pressure from conservative lawmakers to insist on the $61 billion in cuts, as well as policy language that would defund the new healthcare law and Planned Parenthood. It’s unclear whether they’ll be able to win support from their conference for an agreement that falls short of those demands. 

Some Tea Party groups welcome a shutdown and say the GOP should not budge on its demands to cut $61 billion in funding, or on its policy demands. Tea Party Patriots will hold a rally at the Capitol on Thursday that is intended to put some steel in the spine of Republicans who may be thinking of negotiating a compromise. 

Seidenberg said problems for business from a shutdown would run from contracts being postponed to disruptions in the supply chain. He also said companies could have a hard time getting approvals for various licenses approved by the government.

Business Roundtable President John Engler said business would also face the danger of the “law of unintended consequences.” 

Interest rates could rise because of a shutdown, and there could be turmoil in financial markets, according to Engler, a former Republican governor of Michigan. 

Given the turmoil in the world, from upheaval in the Middle East to the nuclear disaster in Japan, Engler said, it would not be a good time for the U.S. government to step out of the business arena. 

The problems for businesses, and the uncertainties for financial markets, are among the reasons Republicans and the White House will want to reach a deal. 

Engler and Seidenberg said their intention is not to get in the middle of the fierce partisan battle. 

“We don’t want to get into the middle of negotiations, but encourage both sides to [reach an agreement],” Seidenberg said. Engler also said businesses agree on the need for the U.S. to deal with its deficit, which holds risks for BRT members. 

But the two made it clear businesses will feel the pain of a shutdown, as will their workers. 

The BRT survey itself forecast increased sales, hiring and growth by businesses in the next six months. 

Eighty-nine percent of the respondents to the survey said they expected to increase hiring or keep their workforce stable in the next six months. This news comes ahead of Friday’s highly anticipated report on March employment from the Labor Department. Unemployment dropped to 8.9 percent in February. 

Seidenberg said the steady flow of capital investment seen in repeated BRT surveys suggests there will be a jump in hiring. Engler pointed to growth in the automotive sector, which he noted has added shifts to some assembly lines. While increased productivity after the recession initially ate into job growth, he said there comes a point where companies simply have to hire workers to expand production. 

The quarterly report from the Business Roundtable is the third positive report from the group in a month. It foresees 2.9 percent growth to national GDP, an increase from the 2.5 percent projected by a survey from the fourth quarter of 2010.