Today Washington has been an absolute madhouse, with rumors, proposals, and counter-proposals swirling around like swarms of biting insects. According to the most recent news, House Republicans have semi-randomly settled on yet another proposal to get out of the crisis. It includes a debt ceiling increase until February 7th, a clean continuing resolution funding the government at current levels until December 15th, a ban on the “extraordinary measures” the Treasury has been using to avoid hitting the debt ceiling, and, bizarrely, the full Vitter Amendment.
Originally House Republicans were going to restrict the Vitter amendment to nixing Obamacare subsidies to members of Congress and the cabinet. But after conservatives pushed back, Republicans broadened it to include Congressional staffers, too, and they won’t get any compensation for losing their benefits. The upshot of all this, then, is that the condition Republicans are demanding for reopening the government and lifting the debt ceiling is a substantial pay cut for their own staffers.
We still don’t know whether House Republicans can pass this plan on their own — Nancy Pelosi just confirmed it will get no House Democratic votes — or what happens next. Meanwhile, a new Pew poll finds that 51 percent view a debt limit hike as absolutely essential to avoid an economic crisis, and that Republicans continue to get more blame than Obama for the mess in Washington.
But one thing that is plainly obvious at this point, as House GOP insanity drags on and on, is that the nonstop crises are not just damaging the GOP in polls — they’re already damaging the economy, too.
A new report from Macroeconomic Advisers (commissioned by the Peterson Foundation) found that the near-constant budget disputes have lopped one percentage point off US growth and cost two million jobs since 2010. Or, to rephrase: political disputes have cut growth by about a third and kept two million people from work. Now, the Peterson Foundation is known best for its 20 years of failure advocating “entitlement reform” (read: social insurance cuts), but that makes this report perhaps even more striking. Even the Peterson people think we’ve been cutting spending too much:
Reductions in discretionary spending have reduced annual GDP growth by 0.7 percentage points since 2010 and raised the unemployment rate 0.8 percentage points, representing a cost of 1.2 million jobs.
Failing to raise the debt ceiling, meanwhile, would be much, much worse. Not only would the government have to slash spending drastically, the ensuing deep recession would crater tax revenue, necessitating even deeper cuts, and so on. The Financial Times interviewed Joel Prakken, an official at Macroeconomic Advisers:
“If it goes on for long it’s a massive fiscal contraction. The annualised rate of spending has to get cut by over $1tn and you have to chase down declining cyclical revenues in order to balance the budget. And if the Treasury was trying to protect interest payments they would probably end up cutting spending even more than that just to create a cushion,” Mr Prakken said.
There’s little new here aside from a formal demonstration of what was already obvious on an intuitive level. Deep austerity and economic hostage taking as a negotiating tactic have done enormous damage to the United States. The Republicans who have repeatedly triggered these crises are distinguished solely by their total immunity to economic and political evidence, or their blatant disregard for the well-being of the American people, or both.