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Anchored by Jake Tapper, The Lead airs at 4 p.m. ET on CNN.

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October 10th, 2013
06:53 PM ET

Economist: Even with a debt ceiling deal, a prolonged shutdown will inflict 'real damage'

A proposed short-term deal to raise the debt ceiling is in the works, and if it passes, it would allow the U.S. to continue paying its debt obligations through November 22.

But what happens on Wall Street if a new deal cannot be reached by the end of next month?

"It will be tough sledding for the market," said Mark Zandi, chief economist of Moody's Analytics. "There will be a lot of ups and downs in the market over the next few days, few weeks until they nail this down concretely."

If the government remains shut down, as seems to be the current Republican plan in the House, that may affect how investors react to even a short term debt ceiling deal.

"By my calculations, the damage to the economy to date is about a half a percentage point off of growth," said Zandi. "That's meaningful but it's not overwhelming. If this were to last another two weeks ... then it could be somewhere between 1 and 1.5 percentage points of GDP. That's real money."

If the government shutdown extends into November, Zandi said it will "start to do some real damage," potentially stalling the economy.

Many Americans care about the stock market because it as a way to judge whether hiring will improve in the U.S., and also because they have retirement accounts.

When can everyone start to exhale?

"As soon as we're not talking about it on CNN, to be frank," said Zandi. "As soon as Washington can push the debt limit off enough into the future and fund the government for at least, you know, the fiscal year, and then Washington gets off the front pages, I think that's when we exhale."

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