Monthly Archives: October 2013

Shock and Awe

As even MSN Money has jumped on the wagon critiquing the shutdown and summarizing the economic impacts. Yes it is rare that I find agreement with the headliners from MSN but the fact they too are touting the big hit our congress gave to the American economy and Americans tells me it must be obvious.

The shutdown forced hundreds of thousands of federal employees and contractors out of work, put government contracts on hold, shuttered national parks and museums and left businesses with fewer customers and lower sales. It’s too early to know the final cost of those and other effects, but analysts at IHS Global Insight said the hit to gross domestic product from lost government services alone totals $3.1 billion.

There will also be some impact from lost private-sector jobs tied to the shutdown, as well as a loss of consumer and business confidence resulting from the debt-ceiling showdown,” IHS economists wrote in an analysis released to the media. “The exact impact on the rest of the economy will be hard to measure until delayed economic data are released.”

Even before that data becomes available, analysts at Standard & Poor’s estimated that the shutdown cost $24 billion (or $1.5 billion a day) and slowed the country’s economic growth rate by an annualized 0.6 percent for the current quarter.

 “The bottom line is the government shutdown has hurt the U.S. economy,” S&P said in a statement. “In September, we expected 3 percent annualized growth in the fourth quarter because we thought politicians would have learned from 2011 and taken steps to avoid things like a government shutdown and the possibility of a sovereign default. Since our forecast didn’t hold, we now have to lower our fourth-quarter growth estimate to closer to 2 percent.”

 

The Battle isn’t over Yet

So we have a temporary break in the DC deadlock. Still a lot of name calling, slightly less loud, and I’m betting it’s short lived. Today I ran across this article from EconoMonitor’s Robert Reich, What to Expect During the Cease Fire.

“The war isn’t over. It’s only a cease-fire. Republicans have agreed to fund the federal government through January 15 and extend the government’s ability to borrow (raise the debt ceiling) through Feb. 7. The two sides have committed themselves to negotiate a long-term budget plan by mid-December. Regardless of what happens in the upcoming budget”

Some good thoughts from the debt ceiling to Social Security. Well worth a read.