Economist Warns Political Brinkmanship Could Have ‘Cataclysmic’ Effects on U.S. Economy
WASHINGTON – The budget impasse in Congress, a looming government shutdown, and reaching the nation’s debit ceiling could all send the tepid U.S. economic recovery into a tailspin, a group of economists warned a Senate panel Tuesday.
If Congress does not pass a budget by Sept. 30, the end of the federal fiscal year, the federal government will partially shut down on Oct. 1.
Even as a government shutdown is on the horizon, lawmakers spent much of a Senate Budget Committee hearing pointing fingers and blaming each other.
At the hearing, Sen. Patty Murray (D-Wash.) accused Tea Party Republicans of holding the nation’s economy hostage in their zeal to “force their ideological agenda” through Congress.
“Some of the Tea Party Republicans have chosen gridlock over compromise, brinkmanship over solving problems, and partisan games over economic recovery,” Murray said. “Here we are today, days away from a possible government shutdown…all because some Tea Party Republicans have decided, once again, to try to defund the Affordable Care Act.”
Sen. Jeff Sessions (R-Ala.) shot back that the country has survived government shutdowns in the past, noting the numerous shutdowns during the Reagan administration, when the Alabama senator served as U.S. attorney general of Alabama.
The last time Congress and the White House shut the government down because they failed to reach a budget was for three weeks, from December 1995 to January 1996.
“Resolving this jobs crisis for working families will take more than just passing a so-called continuing resolution, or a new process for adjusting the debt ceiling; just borrow more, as some have suggested. We need a comprehensive review of our economic policies, and I might add, even our welfare policies,” Sessions said.
Sessions was critical of the government’s economic policies and the Federal Reserve’s quantitative easing policy for weakening the economic recovery.
“Tax more, borrow more, spend more, regulate more, more healthcare from the federal government side is not improving our situation,” he said.
A panel of economists told the committee that even the possibility of a shutdown could have a negative effect on the economy.
If the government shut down for a few days, the economy would suffer only minor damage. But if the shutdown lasts a month, growth could come to a standstill in the last months of the year, Mark Zandi, chief economist at Moody’s Analytics, testified Tuesday. For example, businesses would not be able to get Small Business Administration loans, homebuyers would not be able to get Federal Housing Administration loans, and student would not be able to get federal student loans.
As the panelists testified, Sen. Ted Cruz (R-Tex.) was on the Senate floor beginning his 21-hour speech in an effort to defund Obamacare. Cruz was demanding to remove funding for Obamacare as a condition for passing legislation to fund the government beyond Sept. 30. Under the current schedule, the Senate would not take its final vote on a temporary funding bill until Sunday, and the House would not receive it until Monday. That means there would not be enough time left to work out the difference in the two chambers’ bills, if the House changes the revised Senate bill on Monday. Both chambers must reach agreement on funding by Monday night to prevent most government agencies from closing on Tuesday.