Crisis averted; the debt ceiling has been raised. Before you turn your attention back to your summer travel plans and the challenges of inflation, let’s take stock of what these political shenanigans cost us.
While it will be months before we know the official tally, the 2011 debt crisis provides some clues. The nonpartisan Government Accountability Office estimated that by the end of the 2011 fiscal year, the last debt standoff had cost $1.3 billion. But just because the debt crisis had ended near the end of the fiscal year didn’t mean the costs stopped accumulating. The cost to service our debts made more expensive by the crisis lasted for years, and one estimate suggests that it may have come in close to $20 billion. When you head out for vacation, realize that Congress likely blew more taxpayer dollars on political fighting than it has appropriated to the National Park Service over the past five years.
These estimates reflect the higher borrowing costs that arise when lenders perceive greater risks. In addition, the “extraordinary measures” that the Treasury Department took to delay a potential default date imposed additional costs in terms of lost interest and the diversion of Treasury staff members and resources. But the price we paid doesn’t stop there. The higher borrowing costs that were endured and the kinds of indiscriminate cuts in government spending that occur through the spending caps required to reach a deal also will be likely to slow economic growth.
In 2011, the result was an economy that spent another four years with declining labor force participation and stagnating employment rates. A stronger economic recovery began to take hold in early 2015, but it most likely would have begun earlier without the 2011 debt standoff and resulting budget cuts.
To be sure, economic conditions are different this time. Government spending during the pandemic recession helped fuel a demand-led recovery, an important reason the economy is so strong today. The job market rallied to the strongest overall employment numbers in decades. Some groups have particularly benefited: Black women have the highest employment rate in over 20 years. Still, others — namely rural, white Americans — have struggled to return to work. Slower economic growth resulting from this year’s standoff will disproportionately hurt these groups.
We are having trouble retrieving the article content.
Please enable JavaScript in your browser settings.
Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.
Thank you for your patience while we verify access.
Already a subscriber? Log in.
Want all of The Times? Subscribe.play swerte game