The next time Congress and the president ruminate about getting into another round of budget brinksmanship, they should consider the immense cost of playing such irresponsible high-stakes political games.
As the federal government begins to restart itself, economists are starting to tally the cost of the 16-day government shutdown, and it isn’t pretty.
It’s wrong to state that the shutdown accomplished nothing. It accomplished a great deal of damage. According to Standard & Poor’s, the U.S. economy took a $24-billion hit, or $1.5 billion lost per day. The ratings agency also lowered its outlook for third-quarter growth by .6 percent, from 3 to 2.4 percent.
To put such an economic loss in perspective, Microsoft Corporation’s net profit for the entire 2012 was $21 billion.
While Congress and the president still have their jobs, insulated from the effects of their game of chicken, the shutdown is bound to raise unemployment. Thousands of federal contractors have lost revenue, which in turn means they likely have to lay off workers. As it is, the labor participation rate is the lowest it has been since 1978.
Not all the damage is calculable. As the federal government narrowly swerved away from the cliff of default on its bonds, other nations who buy our debt — China, Japan, Brazil — may not want to take a risk with such nail-biting dramas in the future. Other nations buy our debt for low interest rates because of the AAA ratings the U.S. government enjoys. That this agreement is only a temporary reprieve has given bondholders pause as to whether U.S. treasuries are really a safe basket for all their eggs.
Science and medical research that was stopped and now has to be restarted will cause a delay in presenting the results of clinical trials. Who knows how many lives could have been lost because some drug was not released in time?
That’s why the next round of budget negotiations has to begin in earnest and move towards a solution, not obstruction, of the pressing issues facing the nation.
Constructive negotiations will entail a realistic approach to both health care and the deficit. The Republicans who tried to defund Obamacare can’t just wish away the health-care crisis in the nation. Tens of millions of Americans, who live in the richest nation on the planet, don’t have any health-care coverage and can’t afford to pay for its skyrocketing costs.
Increasingly, cancer patients are being denied the treatment they need because of the costs of new therapies. According to the Institute for Medicine, the cost of cancer treatment rose from $72 billion in 2004 to $120 billion in 2010. That cost is expected to rise to $173 billion in 2020.
And even those who have insurance have to worry about the vagaries of health insurance companies’ policies. Insurers can arbitrarily cancel policies or decide not to allow participants into programs based on past medical history. People with cancer histories have to hang on to their jobs at all costs and their employer insurance, because it would be impossible for them to obtain insurance otherwise.
Those who have taken the risk of forgoing health insurance have often found that it was a bad gamble. One study found that most personal bankruptcies in the U.S. were related to medical bills; 78 percent of those individuals even had insurance.
Meanwhile, the Democrats have to recognize that Obamacare, the way it stands now, has numerous flaws that are already taking their toll on health-care costs and the economy. The Congressional Budget Office has already bumped up its estimate of how much it will cost taxpayers in 2014 — another $125 billion.
Part of the reason for the higher cost projections is that companies now providing coverage to their part-time workers are starting to pull the insurance since they know that the government will subsidize the health-care coverage under the provisions of Obamacare. In addition, companies such as Walmart are starting to shed full-time workers rather than pay for insurance coverage.
Adding more astronomical sums to the deficit is unsustainable; it has to be curbed one way or another. Obamacare can’t be another runaway entitlement program that’s given a blank check. Deficit reduction may mean touching each party’s supposed third rail: entitlement reform for the Democrats, reduced military spending for the Republicans.
Democrats have to explore options for how to reduce spending on Social Security, Medicare and Medicaid, which, according to the CBO, accounted for 72 percent of mandatory government spending.