Friday, October 18, 2013

What Did The Republicano Temper Tantrum Really Cost The Taxpayers They Profess To Care About?


The GOP shutdown may indeed be dead-- at least for now-- and Obamacare is still being birthed but that GOP shutdown cost the taxpayers something like $24 billion, killed a million jobs, raised unemployment, reduced the GDP, left us without food safety inspectors or even nuclear regulatory inspectors and put our government on a very economically precarious and dangerous credit downgrade watch. Yesterday Nancy Pelosi asked her Republican colleagues if their infantile and pointless temper tantrum was worth charging the taxpayers $24 billion dollars.

Lee Rogers is running against one of the Republican heavyweights who got the shutdown to happen, and kept voting for keeping it going, but stuck with Boehner last night when he decided to follow Pelosi's lead. That would be House Armed Services Committee Chair Buck McKeon. Yes, McKeon voted for the Senate deal, but as Rogers pointed out right afterward, “Congress is dysfunctional. How else could you describe it? Brinkmanship and repeated eleventh-hour deals are harming our economy. Last night’s temporary resolution avoids a default just in time. But the damage has been done. Gridlock has cost America 900,000 jobs. The two-week government shutdown has shaved $24 billion off our economy. I have little faith that the current Congress will come to a grand bargain and I’m afraid we’re going to be back in the same position in January when this temporary resolution expires. Our country deserves better than a Congress that will bring us to the brink of default, just to prove a point.” Paul Krugman's latest NY Times column attempts to get down to what Republican economic sabotage has been costing the economy.
As many people have been pointing out, the economic costs of GOP attempts to rule by extortion didn’t begin with the shutdown/debt crisis, and haven’t ended with the (temporary?) resolution of that crisis. The now widely-cited Macroeconomic Advisers report estimated the cost of crisis-driven fiscal policy at 1 percentage point off the growth rate for three years, or roughly 3 percent now. More than half of this estimated cost comes from the “fiscal drag” of falling discretionary spending, with the rest coming from a (shaky) estimate of the impacts of fiscal uncertainty on borrowing costs.

…[T]here are two important aspects of the story that MA leaves out.

First, part of the fiscal cliff deal involved letting the Obama payroll tax cut-- a significant, useful form of economic stimulus-- expire. (Republicans only like tax cuts that go to people with high incomes.) This led to a surprisingly large tax hike in 2013, focused on workers:

Second, GOP opposition to unemployment insurance has been the biggest factor in a very rapid decline in unemployment benefits despite continuing weak job markets:

This hurts the unemployed a lot, but it also hurts the economy, because the unemployed are already living on the edge, and surely must have been forced into spending cuts as benefits expired.

The combination of the payroll take hike and the benefit cuts amounts to about $200 billion of fiscal contraction at an annual rate, or 1.25 percent of GDP, probably with a significant multiplier effect. Add this to the effects of sharp cuts in discretionary spending and the effects of economic uncertainty, however measured, and I don’t think it’s unreasonable to suggest that extortion tactics may have shaved as much as 4 percent off GDP and added 2 points to the unemployment rate.

In other words, we’d be looking at a vastly healthier economy if it weren’t for the GOP takeover of the House in 2010.
Obama took these costs up in his speech to the nation yesterday: "There are no winners here. These last few weeks have inflicted completely unnecessary damage on our economy. We don’t know yet the full scope of the damage, but every analyst out there believes it slowed our growth." And he went on from there:
"We know that families have gone without paychecks or services they depend on. We know that potential homebuyers have gotten fewer mortgages, and small business loans have been put on hold. We know that consumers have cut back on spending, and that half of all CEOs say that the shutdown and the threat of shutdown set back their plans to hire over the next six months. We know that just the threat of default-- of America not paying all the bills that we owe on time-- increased our borrowing costs, which adds to our deficit.

And, of course, we know that the American people’s frustration with what goes on in this town has never been higher. That's not a surprise that the American people are completely fed up with Washington. At a moment when our economic recovery demands more jobs, more momentum, we've got yet another self-inflicted crisis that set our economy back. And for what? There was no economic rationale for all of this. Over the past four years, our economy has been growing, our businesses have been creating jobs, and our deficits have been cut in half. We hear some members who pushed for the shutdown say they were doing it to save the American economy-- but nothing has done more to undermine our economy these past three years than the kind of tactics that create these manufactured crises.

And you don’t have to take my word for it. The agency that put America’s credit rating on watch the other day explicitly cited all of this, saying that our economy “remains more dynamic and resilient” than other advanced economies, and that the only thing putting us at risk is-- and I'm quoting here-- “repeated brinksmanship.” That's what the credit rating agency said. That wasn’t a political statement; that was an analysis of what’s hurting our economy by people whose job it is to analyze these things.

That also happens to be the view of our diplomats who’ve been hearing from their counterparts internationally. Some of the same folks who pushed for the shutdown and threatened default claim their actions were needed to get America back on the right track, to make sure we're strong. But probably nothing has done more damage to America's credibility in the world, our standing with other countries, than the spectacle that we've seen these past several weeks. It's encouraged our enemies. It's emboldened our competitors. And it's depressed our friends who look to us for steady leadership.

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