Over the weekend, while you were enjoying college football or snoozing through your Netflix queue, the federal government was nosediving into a real, live government shutdown—the first in 17 years, in fact.
The Republican-run House continued its quixotic quest to hold the federal government hostage until the president agreed to deny health care to 31 million Americans by defunding Obamacare. This latest gambit added amendments attempting to push back the new health care law for one year while repealing the taxes designated to pay for it, just for good measure.
Because of these riders, the government stopped running at midnight on October 1 (after a half-baked game of hot potato). But while these radical Republicans sit behind closed doors congratulating themselves for their ideological purity, real Americans will be paying the price.
We’ve Made a Huge Mistake
The current budget shutdown mainly affects discretionary spending: programs like Meals on Wheels, WIC and Medicare. Also, in a bit of irony, Obamacare would not be affected. That said, we’re still talking about $1.1 trillion in spending, according to the CBO. Pulling that level of spending out of a still-recovering economy—even if only temporarily—will necessarily have a significant impact.
A short-lived government shutdown (a few days to a week) would delay some economic activity, and economic reports for October would take an additional hit, rubbing salt in the wounds of an economy still sore from the Great Recession.
But, even without the disruption caused by a shutdown, there’s still about $92 billion in spending differences between the House Republicans’ bill and Senate Democrats’ budget resolution, according to my colleague Andrew Fieldhouse who has written extensively on this topic. For an economy projected at $17.2 trillion in fiscal year 2014, $92 billion represents 0.5 percent of the GDP.
Of course, one dollar of government spending generates more than one dollar of spending throughout the economy. That means that the Republican budget could actually take about 0.7 percent of GDP out of the economy in 2014 (or, more realistically, about 0.4 percent in 2014 and another 0.2 percent in 2015).
All this Republican talk about doing what the American people want apparently means wrecking the economy.
The even bigger hit—especially for the 7.5 percent of Americans who are still out of work—is that the Senate Democrats’ plan would add an average of 40,000 additional jobs per month over the next year and an average of 20,000 jobs per month the following year . . . if the resolution to a government shutdown reflects the Senate Democrats’ budget rather than the House Republicans’ budget.
The economy must add a little more than 100,000 jobs per month just to keep up with population growth. We’ve been adding an average of 184,000 jobs per month over the last year, leaving us with a net of about 84,000 jobs per month toward cutting into the unemployment rate. Of course, we need to create 8.3 million jobs to restore pre-recession unemployment rates based on today’s labor force. At the current pace, we’ll need another 99 months to catch up. That puts recovery somewhere around 2022.
Unless, of course, Republicans manage to cut our 84,000 jobs per month in half.
That amounts to an actual big deal.