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Impact of U.S. shutdown in Canada

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U.S. politicians are once again deadlocked on a temporary spending bill as they try to reach an agreement to avert a government shutdown. It means in less than an hour nearly one million families could lose their paycheques, putting America’s economic recovery in jeopardy. But what could it mean on this side of the border? Melissa Raftis has a look at the impact on our economy.

As the clock ticks closer to midnight U.S. President Barack Obama says a government shutdown would throw a wrench into the gears of the U.S. Economy: “A shutdown will have a very real economic impact on real people right away.”

800-thousand government workers would be sent home, and millions of Americans who rely on federal services inconvenienced. Republicans are demanding the implementation of obamacare be delayed a year in exchanged for passing the budget and the President isn’t caving on his healthcare plan.

In a statement, our federal Finance Minister Jim Flaherty expressed his hope that the White House and Congress will come to a resolution. He writes in part: “This is a reminder that while Canada’s economy remains strong, we are still vulnerable to uncertainties outside of our borders, especially in the U.S. and Europe”

And NDP leader Tom Mulcair warns the potential shutdown could have serious effects on Canada’s economy.

“It’s estimated that the potential shutdown at midnight could reduce the third quarter GSP in the U.S. by as much as 1% and that would have a very serious effect on the Canadian economy.”

But Marvin Ryder of the DeGroote School of Business says we don’t need to worry just yet: “If this were to go on for a month, then yes the U.S. would fall back into a recession and we would go right along with it. But every time in the last 5 years when they’ve gotten close to this they’ve missed the deadline, three days later they then find the deal, they then pass it, we forget about it and everything goes back to normalcy.”

The markets reacted negatively in anticipation of the shutdown with the Dow Jones off 128 points. Ryder says we can expect the same tomorrow (tuesday) but he does think we will see a resolution in the coming days.