Issue of the week: The true cost of the shutdown

Now we know: “Shutdowns aren’t cheap,” said Josh Hicks in WashingtonPost.com. The forced paralysis of the U.S. government for 16 days cost an estimated $24 billion in lost economic output, according to Standard & Poor’s, or 0.6 percent in annualized economic growth. That showed up in different ways: some $2.4 billion in lost travel spending, for instance, and $450,000 per day in lost revenue at shuttered national parks. It’s over for now, but we may not be out of the woods yet. “As most politics junkies know, the government could soon shut down again if Congress and the White House cannot agree to another spending plan early next year.” S&P is among those warning that the threat alone could dampen consumer spending, pointing to “another humbug holiday season.”

Calm down, said Jeffrey Dorfman in RealClearMarkets.com. “The economy will suffer no loss from the government shutdown.” Yes, some businesses that make money from visitors to Washington, D.C., or federal sites elsewhere have suffered, along with some idled federal contractors. “But any losses in one part of the economy will be offset by gains somewhere else.” Tourists who didn’t spend money at national parks will spend it somewhere else. Government employees will get back pay and will catch up on “any spending they did not do during the shutdown.” All the money that wasn’t spent, in other words, doesn’t disappear, but winds up getting spent a little later or saved, and savings also benefit the economy. “While the shutdown may not have accomplished anything other than disrupting many people’s lives, it did not cause damage to the national economy.”

In fact, it has left lasting scars, said The New York Times in an editorial. In light of the higher payroll taxes and federal spending cuts imposed at the end of last year, everyone expected the economy to get off to a sluggish start this year. “The only consolation” was that forecasters expected better conditions later in the year. Thanks to the government shutdown, “that’s not going to happen.” Political brinkmanship of the sort we’ve experienced these days “sows uncertainty,” spurring investors to demand higher interest rates and doing lasting damage to the economy. “President Obama took the right path by refusing to negotiate” with Republicans’ unreasonable demands, but his challenge now “is not only to undo the damage” but also to get us back on the recovery track.

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The real cost of this debacle isn’t expressed in dollars, said Gerald F. Seib in The Wall Street Journal. “Washington’s misadventures have extracted a historically high toll on America’s confidence.” The feeling that our leaders “are botching the job of managing the government’s finances” sends shock waves through the country, starting “an un-virtuous cycle, in which jittery consumers pull back, causing businesses to scale back investment and hiring plans.” Gallup’s daily gauge of consumer confidence has already plunged dramatically. Our politicians should take note of the harm they’ve done “to the national psyche” and finally move to “a sane and functional budget process.”