A US government shutdown brings challenges to the world’s biggest economy and could lead to dampened demand while authorities provide fewer resources to people, a top Treasury official warned on Monday.

The comments, by Deputy Treasury Secretary Wally Adeyemo at the Economic Club of New York, come as a shutdown looms at the end of this month.

The White House has asked Congress to swiftly vote on a budget extension to avoid such a situation, which could paralyse nearly the entire federal government.

“We’re doing far better than I think many people had expected because of what we’ve done in terms of targeted investment,” said Adeyemo.

“The last thing we need is the headwind of a government shutdown,” he said, although there are well-rehearsed plans for such a scenario.

“But what they all lead to is less demand in the economy, an economy in which the government is providing fewer resources to the American people,” he said.

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“Ultimately, that is not good for anyone,” he added.

For now, a short-term so-called continuing resolution will be needed this month to avoid disruptions to government services in the new fiscal year starting Oct 1.

But control of the US Congress is split, with Democrats holding the majority in the Senate and Republicans in charge of the House of Representatives, adding uncertainty to any potential agreement.

This is the second time in recent months that the United States has faced serious financial uncertainty thanks to political conflict.

While Congress already agreed to spending caps as part of a June debt ceiling bill, economists at Pantheon Macroeconomics said in a recent report that “the extreme right of the Republican party was never happy with that bill.”

“They now see an opportunity both to force through deeper cuts and to pursue a host of other objectives, including impeaching President (Joe) Biden,” added the report dated on Monday.

Adeyemo also spoke on challenges that China is facing, including high youth unemployment rates and a struggling property sector.

While the world’s number two economy has resources and the ability to deal with issues in the short-term, “the bigger challenges that China has are structural ones” including demographic challenges, he said. AFP