Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.
Topic: Federal shutdown
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October 15, 2013 at 10:32 AM
The Associated Press distributed a story implying that default is no big deal. “You hear the same proud claim every time Washington wrestles with the debt limit: The United States has never defaulted. But the record’s not that clean. America has stiffed creditors on at least two occasions.” One was during the war of 1812. Another, it claims was in 1979, when “lawmakers determined to attach a strong balanced-budget amendment to the (budget) bill. They finally relented, the day before Social Security checks were expected to start bouncing.”
It’s a nice story, comforting, wrong. In 1814, the United States was a developing nation heavily dependent on trade with the country we were fighting, Great Britain. Even so, the economic consequences of the War of 1812 were catastrophic and took years from which to recover.
By the way, Andrew Jackson, a pre-tea partier, was obsessed about the national debt when he wasn’t stealing land that had been promised to native tribes in solemn treaties. As president he paid it off. This did not prevent the financial panic that ruined the administration of his chosen successor, Martin Van Buren. It arguably made it worse, choking off foreign investment.
October 8, 2013 at 10:35 AM
Want to find out data on Washington exports? You’re out of luck. The U.S. International Trade Administration’s valuable TradeStats site is down because of the shutdown engineered by House Republicans. But that and such photogenic consequences as closed National Parks count for nothing against the trouble being inflicted on the poorest of the poor.
We pretty much abolished welfare during the Clinton years, replacing it with a paltry program called Temporary Assistance to Needy Families (TANF). It goes out as block grants to states, and the longer the shutdown continues, the more likely TANF will run out. In Washington, benefits will continue through the month, but Arizona halted the payments.
But in today’s America, we don’t care much for the last and the least, for all the theocratic talk. Otherwise, the shutdown’s economic consequences appear to be muted. Not least to avoid a potential Praetorian Guard backlash, the Obama administration made sure “the troops” were funded with no disruption, and last weekend Defense Secretary Chuck Hagel called back almost all of the 400,000 (!) civilian defense workers that had been furloughed. The effect on defense contractors may be similarly softened.
Most analysts are predicting only a limited effect on gross domestic product. Still, it remains to be seen how the stalemate affects, say, housing if federal loans become harder to get. The shutdown is also a serious threat to federal research, which in the past was one of America’s major competitive advantages. And don’t forget the sequester’s ongoing damage to the economy and jobs.