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Thursday, 17 October 2013 09:29

The Tea Party and the Economy: It's Like Putting an Arsonist in Charge of the Fire Department

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aboutjobless10 17Protesting Against the Tea Party Job DestroyersIt's the brazenness of the Tea Party and its GOP hold on the House of Representatives that sometimes still takes one's breath away. 

After the temporary resolution to the economic hostage crisis that may flare up again in just a few months, House Budget Chair and Ayn Rand acolyte, Cong. Paul Ryan (R- WI), said that he is committed: "to get this debt under control, to do smart deficit reduction and to do things that we think will grow the economy and get people back to work."

But by virtually every account the GOP Tea Party tactics have cost jobs and seriously dented the gross domestic product over the past few years, and certainly in the past few weeks.  Even the very conservative pro-austerity Peter G. Peterson Foundation, as noted by Think Progress, issued a report about the devastating toll of the Republican "pay us a ransom" government by crisis:

The report ... finds that cuts to discretionary spending from 2011 to the present have cost the country 1.2 million jobs and 0.7 percentage points of GDP growth. About three-quarters of the $2.4 trillion in total deficit reduction enacted since the fall of 2010 was in the form of spending cuts. The Peterson-commissioned estimate of what that steep reduction in government expenditures has cost is a bit more conservative than previous estimates by other economists, but only slightly less negative.

An October 17 article in The Atlantic states that "the budget wars since 2010 have cost us 12 months in job creation."  The article covers the likely economic and job costs of the Tea Party war on the US economy, including the toll from the latest attack and overall effect since the radical luddites swept to power in the House in 2010:

Macroeconomic Advisers put the figure at $12 billion. S&P estimate the cost was twice as high, at $24 billion. Split the difference, and you're talking about $18 billion in lost work.

What's a good way to think about that kind of money—a sliver of the entire $15 trillion U.S. economy, but still, you know, $18 billion? In July this year, NASA funding was approved at around $17 billion for the fiscal year. So, there: The shutdown took a NASA-sized bite out of the U.S. economy. 

But that's just a nibble compared to the total cost of the budget showdowns stretching back to 2010. According to Macroeconomic Advisers, the total cost of Congress's assault on the economy going back to 2010—including the budget cuts, including sequestration, and fights around the budget cuts—was about 3 percent of our entire economy. That's $700 billion. That's not just NASA. It's one year's entire defense budget. 

According to the report, discretional spending cuts removed 1.2 million jobs from the economy, while policy uncertainty, graphed below by the New York Timescost another 900,000.

So let's do some math here -- something that the Tea Party has extreme difficulty with: if the economic speculation is correct, the "don't tread on me" crowd has cost the nation 2.1 million jobs in less than four years!

The New York Times pegs the loss of domestic output due to the rolling Tea Party bellicose actions as $300 billion:

The unusually rapid pace of deficit reduction, concentrated on goods and services the government delivers, has had a further damping effect on growth, swamping the cost of the relatively brief shutdown, economists said. Macroeconomic Advisers estimated the impact at about 0.7 percentage points of G.D.P. a year, equivalent to over $300 billion in lost output over the last three years. Additional cuts would slow the economy even more, economists say.

“We are baffled by the idea that the pace of deficit reduction needs to be increased, given how rapidly the picture is improving already,” Ian Shepherdson, the chief economist of Pantheon Macroeconomics, wrote in a note to clients.

The 16-day shutdown itself has already led to the biggest plunge in consumer confidence since the collapse of Lehman Brothers in 2008. Howard R. Levine, the chief executive of Family Dollar Stores, said his customers, most with modest incomes, had pulled back on spending this month.

Of course, the rippling impact hits sectors such as the housing market, which was bouncing back nicely until the latest House salvo on the financial state of the US.  Now, mortgage rates have climbed and many home and condominium buyers are finding it difficult to obtain loans.  The uncertainty of never knowing when an economic hostage taker is going to hold a gun to the head of the United States takes its toll.

There is much additional evidence of how the Tea Party has torpedoed a struggling recovery, but suffice it to say putting Paul Ryan, Eric Cantor and John Boehner in charge of job and economic stimulation would be like putting three arsonists in charge of the fire department.

(Photo: Jagz Mario)