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‘Shutdown Won’t Hurt Economy, Debt Limit Will’

From the Washington Post:

Government shutdown unlikely to damage economy, but debt limit could be catastrophe

By Ylan Q. Mui and Marjorie Censer | October 7, 2013

The economic damage from the government shutdown will probably be muted as thousands of Defense Department employees returned to their jobs Monday and lawmakers worked on a deal to provide back pay to furloughed civil servants.

Economists warned that some effects will linger, with consumers feeling spooked and pockets of the economy afflicted by closed national parks or a slowdown in government-related business.

But the collective impact of a scaled-back shutdown is expected to be small, and many economists have already shifted to sounding the alarm over a significantly scarier scenario: the likelihood that a paralyzed Congress will allow the nation to default on its debts.

The government could run out of money to pay its bills as soon as the middle of this month if Congress fails to raise the borrowing limit. That would undermine global confidence in the United States as the world’s financial safe haven and could permanently increase the nation’s borrowing costs…

And never mind that none of this is true. The US can easily able to pay all of the bills it has to pay with the tax revenues it takes in. Besides, what is more crazy than borrowing money to pay bills?

“This all comes down to a confidence issue,” said Lindsey Piegza, chief economist for Sterne Agee. “The consumer is just very, very sensitive to the shenanigans in Washington."

A survey by Gallup showed that Americans’ confidence in the U.S. economy plunged as the government shutdown became reality and that it continued to slide through the end of last week. The Gallup index now stands at its lowest level since December 2011.

Well, we’re told the economy boomed after December 2011. So what’s the problem?

Investors are also getting worried. A poll by TD Ameritrade over the weekend found that nearly three-quarters of investors said they were beginning to lose confidence in the recovery. Though the bulk of them have not made changes to their portfolios, about 10 percent said they have moved some of their money into cash…

This has nothing to do with the shutdown or the debt ceiling and everything to do with Obama and the Democrats and their giving us the worst recovery in US history.

Doug Handler, chief U.S. economist at IHS Global Insight, estimated that the shutdown would shave about six-tenths of a percentage point from the nation’s gross domestic product during the fourth quarter. His calculations assumed federal workers would be paid eventually, but he said the benefit of an early return by Pentagon employees was almost too small to measure.

Hilarious. The Pentagon’s furlough of 800,000 workers was supposed to cause the end of the world. That is, until it didn’t.

Not raising the nation’s debt ceiling, however, could be catastrophic. A recent report by Goldman Sachs projected that halting Treasury payments would slash the growth of gross domestic product by 4.2 percentage points over a year. Although economists think the likelihood of default remains small, even flirting with not raising the debt limit could roil world markets.

“There’s a modest amount of uncertainty and inconvenience associated with the shutdown,” Handler said. “But that will get magnified once the debt-ceiling debates get very intense.” …

This is almost like the obverse of the GOP leadership always wanting to fight the next fight. According to the news media, it’s always the next problem that is going to be the real catastrophe.

Remember how the sequester was going to destroy the economy and push us back into recession. But then the sequester turned out not to be a problem, so the media moved on to the government shutdown.

But now it’s turned out that the shutdown is not hurting the economy, so they are moving on to fearmonger about the debt limit. And when that turns out to be a bust, it will be something else on the horizon.

This article was posted by Steve on Tuesday, October 8th, 2013. Comments are currently closed.

8 Responses to “‘Shutdown Won’t Hurt Economy, Debt Limit Will’”

  1. Reality Bytes says:

    Raising the debt limit is like giving your wife a black card so she can pay her bills.

    The reason everyone missed tying Obamacare to the debt limit is DC’s utter lack of control for spending. They’re not paying their bills! They’re bankrupting the US! And you want to give them more? Fine! Let’s just step away from the biggest financial disaster – government run healthcare & talk about how we’re going to pay down what they’ve already screwed up!


  2. Right of the People says:

    You just can’t spend your way out of debt. Only a moron, like Barry O, can believe that.

  3. Astravogel says:

    So, all the folks who didn’t visit National Parks and Historic Sites
    and didn’t spend any money on food, gas, entrance fees, &c.
    aren’t causing any losses? My goodness! At least the closure
    got us a couple of furloughed Park Rangers for our Civil War
    reenactment last Saturday. One even brought his horse, which
    left some parting reminders of what the current administration
    consists of.

  4. platypus says:

    “The end of the slush fund to pay my buds??? Lordy, that’s a friggin’ crisis!”

    — Little Lord Barky Screwup .

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