Economists are still trying to assess the costs of last year’s debt-ceiling crisis—those nerve-wracking months when Republicans refused to raise the limit on U.S. government borrowing unless Congress enacted sharp spending cuts. Eventually, the White House and the GOP came to an agreement and the debt ceiling was raised, but not before making everyone nervous.
And now here comes the Government Accountability Office with an estimate (pdf) of what those jitters cost. According to the GAO, delays in raising the debt limit led to a slight increase in borrowing costs for the United States. That cost the Treasury about $1.3 billion in 2011, and the price tag will expand in the years to come:
We found that the 2011 debt limit event led to a premium on Treasury securities with maturities of 2 years or more while Treasury securities with shorter maturities either experienced no change or became slightly less costly relative to private securities. Applying the relevant increase or decrease in the yield spread shown in figure 2 to all Treasury bills, notes, bonds, CM bills, and TIPS issued during the 2011 debt limit event period, we estimated that borrowing costs increased by about $1.3 billion in fiscal year 2011.
On a related point, the GAO report notes that debt-ceiling uncertainty forced Treasury staffers to work overtime trying to figure out when the United States might hit its absolute borrowing limit and how to juggle resources so as to avoid default. And that meant a lot of paperwork:
[Treasury's staffing department] estimated that managing federal debt when delays in raising the debt limit occurred in 2011 and January 2012 resulted in almost 5,750 hours of work, including over 400 hours of overtime and compensatory time. This included more than 1,200 hours in the weeks prior to the use of extraordinary actions for meetings, preparation of parallel accounts and spreadsheets to use in tracking uninvested principal and interest losses, tests of the accounting system, and training staff.
Granted, this doesn’t include any broader costs to the U.S. economy. Justin Wolfers and Betsey Stevenson have suggested that Congress’s game of chicken may have hurt consumer confidence in the summer of 2011 and perhaps even slowed the pace of job creation. “All told,” they conclude, “the data tell us that a debt-ceiling standoff is an act of economic sabotage.”