Some view the shutdown and accompanying maneuvers as mere theater, and obviously elements of that exist. But this doesn't lessen the impact of the shutdown on the workings of an economy riven with the worst inequality of wealth and income in more than a century and plagued by a tepid 51-month "recovery" almost all of whose benefits have flowed to the top one percent. Nearly six years after the Great Recession began, unemployment remains at 7.3 percent and only that low because so many have bailed out of the workforce altogether.
What's most troubling is that too few economists and almost no politicians see these acute problems as being mostly mere symptoms of chronic problems with the economy, not the least of which is the highly predatory capitalism associated with over-financialization of the entire system.
Amid this continuing mess, it may seem like small potatoes that Standard & Poor's estimates that the shutdown has (or will) cut 0.6 percent off the fourth-quarter gross domestic product, which is what that $24 billion figure amounts to. S&P had previously forecast a 3 percent growth rate for the fourth quarter (on an annualized basis) but now is calling it closer to 2 percent. And S&P's previous forecast has been high compared with others. At IHS Global Insight on Wednesday, analysts lowered their fourth-quarter GDP growth estimate to an annualized 1.6 percent from 2.2 percent. In December, estimates for GDP growth for all of 2013 were running as high as 3.5 percent.
A few details of the shutdown's cost, according to S&P: Some $3.1 billion in lost government services; $152 million a day in lost travel spending; $76 million a day lost from closed national parks and monuments; $217 million per day in lost federal and contractor wages in the Washington, D.C., metropolitan area alone. The effects, especially the psychological effects, won't end just because the shutdown has.
Please read for more analysis and a prescription below the fold.
At The Wall Street Journal blog, Sudeep Ready notes:
The most frequent gauge of consumer sentiment, Gallup’s daily index of economic confidence, plummeted in recent weeks. The drop was worse than the decline in 2011’s debt-ceiling fight and on the scale of the stunning drop seen during the global financial crisis in September 2008. Confidence took six months to recover after the 2011 fight.S&P also said that the shutdown deal itself is problematic. “The short turnaround for politicians to negotiate some sort of lasting deal will likely weigh on consumer confidence, especially among government workers that were furloughed.”
But Standard & Poor’s economists said another fight in just a few months could pose another threat ahead of the critical holiday shopping season. “If people are afraid that the government-policy brinkmanship will resurface again, and with it the risk of another shutdown or worse, they’ll remain afraid to open up their checkbooks,” S&P said. “That points to another Humbug holiday season.”
Mark Zandi, of Moody's Analytics, on Wednesday:
“I’m increasingly of the view that the reason why our economy can’t get into a higher gear is because of the uncertainty created by Washington, that this brinkmanship which happens every 3, to 6, to 12 months is corrosive on our collective psyche and it’s weighing on our willingness and ability to take risk,’’ Zandi said during a meeting with journalists at Washington think tank Third Way. Such uncertainty doesn’t cause businesses to lay off workers, but it does cause them to delay hiring and reduces their willingness to invest in riskier areas such as research and development, he said.Zandi says the solution is for Washington to get out of the way and let the private sector do its thing. That certainly sounds like something the Third Way folks would like to hear. It was what a lot of Republicans said in January 2009 when the Obama administration put forth its barely passed stimulus program. Flawed as it was, too small as it was, without that stimulus, the economy would be worse off than it is.
But we're now guaranteed another three months of politicians concentrating on cutting government debt.
In a sane world, even in one not directed toward a more thorough fix of our economy, more than a handful of progressive politicians would be pushing for more government borrowing at still-low interest rates to invest in fixing, upgrading and innovating our nation's crumbling infrastructure and providing millions of badly needed jobs in the process. Not just fixing the 70,000 or so bridges and thousands of schools that are falling down from deferred maintenance. But investments in rail, vastly expanded solar and wind and geothermal power, faster and better wi-fi nationwide, and the conversion of Rust Belt and other moribund cities into models of sustainable modernity.
To such proposals, of course, will be raised all manner of objections from across the spectrum, including many progressives. Tiresome stuff. Our slogan should never be: No can do.