"A wonderful circus."
That's one way Martin Wolf, chief economics commentator for the Financial Times, describes the shutdown and debt ceiling debacle from his perch in London.
Of course it was also "too terrifying" but Wolf, like many, always assumed the U.S. Congress would come to some kind of agreement and end the shutdown and avoid defaulting on its debt.
Standard and Poor's says the "circus" that just left town could cost $24 billion, that's 0.6% of annualized fourth quarter growth. Add in the more than $1 billion cost of reopening the government (that's how much it cost in 1995/1996 according to the CBO) and you're at $25 billion. But that's peanuts compared to the report published by Macroeconomic Advisers this week. They say the ongoing "uncertain" U.S. fiscal policy could cost $700 billion in the long term.
Yup. $700 billion.
Still, Wolf says the hit to growth is "not a disaster, in the sense that, everybody knows when the money comes back everybody pretty well will be paid. So it will come back in the next quarter. There is some permananent damage..."
That permanent damage he refers to is certainly the credibility problem that the U.S. will face ahead as it leaps from self-imposed fiscal mess to fiscal mess.
As President Obama said last night, “We’ve got to get out of the habit of governing by crisis.”
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- Martin Wolf