Treasury Secretary Scott Bessent on Thursday warned that the government shutdown could harm economic growth and blasted Dems for the impasse.
“This isn’t the way to have a discussion, shutting down the government and lowering the GDP,” he told CNBC’s “Squawk Box” on the second day of the shutdown. “We could see a hit to the GDP, a hit to growth and a hit to working America.”
The comments came after legislation to continue funding the government failed to pass in the Senate, sparking the shutdown after midnight on Tuesday.
“The Democrats want to negotiate like terrorists,” Bessent fumed. “They want to say, ‘This is what we have to have and if we don’t get it, we’re going to close down the government.’”
Bessent accused Senate Minority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries, both New York Dems, of playing politics. For their part, the duo have blamed Republicans for the shutdown.
“The American people are being held hostage by Chuck Schumer’s poll numbers,” said the treasury secretary. “If they want to shut the government down, then there are ramifications.”
Gross domestic product showed the US economy expanded at a strong 3.8% annual pace in the second quarter – a sharp turnaround from a 0.6% contraction earlier in the year – according to the Commerce Department.
While previous shutdowns saw federal workers go without pay, President Trump is threatening to fire them en masse this time around – drawling howls from Dems.
Bessent dismissed Democratic leaders’ concerns on the fed firings as a “talking point.”
Here’s what we know about the government shutdown
- Democrats and Republicans failed to reach an agreement over a stopgap funding measure by Tuesday night’s deadline, leading to the shutdown.
- The S&P 500 and Nasdaq indexes fell at the start of Wednesday’s trading session following the shutdown.
- Student loan payments must still be met during this time, while the Education Department will halt new grantmaking activity and investigations over possible civil rights violations.
- If the shutdown continues, the Bureau of Labor Statistics’ nonfarm payrolls report, considered far more comprehensive and reliable than the ADP release, will not be released on Friday.
- Funding for the Hudson Tunnel project and Second Avenue subway extension in New York has been put on hold.
Underlying weakness in the labor market is a big concern for economists, after outsize adjustments revised the number of jobs created during the 12 months ended March down 911,000 – the largest downward revision since 2000.
The Federal Reserve – which slashed interest rates by a quarter point last month for the first time since December – noted that the labor market is now a larger concern than inflation fears.
Private payrolls plunged 32,000 in September, the most in two and a half years, according to an ADP report released Wednesday.
While layoffs have slowed, hiring is way down, too – US employers planned to add 58% fewer jobs in the first nine months of the year compared to the same period in 2024, according to a Challenger, Gray & Christmas report released Thursday.
Here’s the latest on the government shutdown
Just two Dems voted in favor of the Republican budget legislation earlier this week. Five more would need to break ranks with their party to get the legislation through.
On CNBC, Bessent teased an announcement set for next Tuesday about “substantial support” for farmers, especially those in the soybean industry.
He also said interviews are still in progress to find a replacement for Fed Chair Jerome Powell, whose term expires in May.
The first round of interviews with candidates on Trump’s short list has been completed. The second round will start next week, and then Bessent will decide on a list of three to five candidates to refer to Trump for a final decision.
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