Key Takeaways
- The US federal government shutdown is reportedly costing the American economy an estimated US$15 billion (S$19 billion) per day in lost output, with Treasury Secretary Scott Bessent warning it is "starting to eat into muscle" of the economy.
- In the UK, Labour's influential Fabian Society is urging Shadow Chancellor Rachel Reeves to extend the freeze on income tax thresholds for another two years, a move projected to raise £12 billion for the upcoming November 26 Budget.
- This proposal, initially a "Tory stealth tax" under former Chancellor Rishi Sunak and extended by Jeremy Hunt, highlights the significant fiscal challenges facing the UK government as it seeks to build more fiscal headroom amidst weaker economic forecasts.
Treasury Secretary Scott Bessent has issued a stark warning regarding the ongoing US federal government shutdown, stating that it is significantly damaging the American economy. Bessent indicated on October 15 that the two-week-old shutdown is costing the economy approximately US$15 billion (S$19 billion) in lost output daily. He emphasized that the shutdown is "starting to eat into muscle" of the US economy, urging Democrats to collaborate with Republicans to resolve the impasse.
Bessent acknowledged the sustainability of current investment trends into the US economy, particularly in areas like artificial intelligence, but stressed that the prolonged government shutdown presents an increasing impediment to this growth. His comments underscore the growing concerns within financial circles about the tangible economic consequences of political gridlock.
Meanwhile, across the Atlantic, the UK's economic landscape is also under scrutiny as Shadow Chancellor Rachel Reeves prepares for the next Budget statement on November 26. The influential Labour thinktank, the Fabian Society, has put forward a proposal for Reeves to generate £12 billion by extending the freeze on income tax thresholds for an additional two years.
This policy, which began in 2022 under then-Chancellor Rishi Sunak and was subsequently extended by Jeremy Hunt, has been described as a "Tory stealth tax." The Office for Budget Responsibility (OBR) had previously estimated that this freeze would bring in an additional £45 billion a year by its scheduled end in 2027/28. The Fabian Society's General Secretary, Joe Dromey, argues that extending the threshold freeze is the "best available option" for the Chancellor to offset the impact of weaker economic forecasts and build crucial fiscal headroom.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.