The cost of uncertainty: 900,000 jobs
By Steve Brawner
First, an admission: Journalists like to quote studies by experts, particularly if we agree with them, because they convey absolute truth about subjects that aren’t completely knowable. Then we cover ourselves by adding the words “allegedly” and “reportedly,” in case the expert is proven wrong.
That out of the way, an economist reportedly has released a study with which I agree.
“The Cost of Crisis-Driven Fiscal Policy,” prepared by Dr. Joel Prakken of Macroeconomic Advisers for the Peter G. Peterson Foundation, places a value on Washington fiscal policy uncertainty: 900,000 jobs. That’s how many people aren’t working today because Congress and the White House keep having these last-minute budget battles that don’t lead anywhere.
The study didn’t find evidence that political uncertainty directly discourages businesses and households from spending and investing, though it doesn’t discount that possibility. Of course it does, but it’s hard to get into the minds of employers and consumers. Instead, it points to what can be measured — decreased stock prices and the rising costs of borrowing when lenders become less certain their money will be paid back.
The study, which was published before the deadlock was broken last week, also considered what would have happened had the debt ceiling not been raised. If the federal government had refused to pay all its bills for only a brief time, the economy would have stalled until the end of 2014, and 2.5 million additional people would have been unemployed. A two-month debt ceiling dispute would have increased unemployment by 3.1 million jobs.
That didn’t happen this time. However, under the terms of the agreement, the government is only funded through Jan. 15, and the debt limit will be reached again on Feb. 7.
So we could be right back where we were very soon. Oh, well, at least we’ll get through Christmas.
Meanwhile, the study says a two-week partial government shutdown – which is about what it was – would reduce economic growth during the last three months of the year by .3 percentage points, mostly because of federal employees’ reduced activity. It also asserts that reductions in spending as a result of the 2011 budget-cutting sequester have cost the economy 1.2 million jobs.
That spending is being financed through debt, by the way. I’m not sure how we balance the budget without people, regrettably, losing their jobs.
The report is only 14 pages. It could have been a lot longer. It doesn’t mention the costs of other uncertainties created by Washington, such as farmers still waiting on a farm bill and business owners trying to figure out what’s happening with health care.
How much has the economy suffered from all these fiscal cliffs and debt ceiling debates? No one can say with certainty, and that includes Prakken. But one thing is certain: It has an effect.
Reportedly, 900,000 jobs.
CORRECTION: This column started with an admission. Here’s another. A recent column about the shutdown/debt ceiling debate included the line, “Having little else to accomplish, Rep. Tim Griffin, R-Ark., is leading tourist groups through the Capitol.”
The line was written after his office announced he was leading those tours. I wrote it as an illustration of the congressional stalemate and not as a personal criticism of Griffin’s work habits. I wrestled with the line a bit.
Griffin emailed respectfully to take issue with the sentence. He said he had led only two tourist groups and had been working to resolve the crisis.
I did not wish the line to imply otherwise. It’s corrected.
Steve Brawner is an independent journalist in Arkansas. His email address is brawnerstevemac.com. Follow him on Twitter at stevebrawner.