The fights over the government shutdown and raising the debt ceiling reduced economic output by 0.25 percent in the fourth quarter of this year and cost about 120,000 private sector jobs in the first two weeks of October, according to a new report from the White House’s Council of Economic Advisers (CEA).
The report notes that these figures “could understate the full economic effects of the episode to the degree it continues to have an effect past October 12th.”
Rather than predicting the impact as many other reports have done, by looking at eight economic indicators as part of its “Weekly Economic Index” the CEA report examines the actual performance of the economy during that period and takes secondary effects into account, such as the impact on the private sector and the drop in business and consumer confidence. The report notes that “a range of indicators show that sentiment, job creation, consumption, and some elements of production grew more slowly in the first half of October than in previous months.”
Other reports found similarly large numbers for the cost of the shutdown. IHS, Inc. put the figure at $300 million a day when it began, and once it was over Standard & Poor’s calculated that it shaved at least 0.6 percent off of GDP in the fourth quarter and took $24 billion out of the economy, or about the same amount as paying for a year of Head Start, the Children’s Health Insurance Program (CHIP), and the Women Infants and Children (WIC) program combined. The government also stood to lose billions in tax revenues and the deficit was likely made worse.
This episode wasn’t unique, unfortunately. After the Republicans took control of the House in 2010, they continually pushed the government to the brink of crisis after crisis to try and wring victories on a long list of demands. This governing by crisis has cost the economy nearly 1 million jobs and reduced GDP growth by 0.3 percent a year.