On the first slide of his PowerPoint presentation on the merits of his debt-limit deal with the president, House Speaker John Boehner, R-Ohio, says the agreement avoids “tax hikes, which would destroy jobs, while preventing a job-killing national default.”
Nowhere in the seven-page document, nor in the excerpts of Boehner’s remarks to GOP House members released by the speaker’s office, do the words “job” and “creating” appear together. They don’t show up in the White House fact sheet on the deal, either.
President Obama opened his remarks on Sunday night by saying the agreement “will reduce the deficit and avoid default”; he closed by saying it “will allow us to turn to the very important business of doing everything we can to create jobs, boost wages, and grow this economy faster than it's currently growing.”
The very obvious question, for everyone involved, is “Wait – you weren’t doing that already?”
They weren’t, of course, and both sides appear to have dropped any suggestion to the contrary. Congressional Republicans aren’t claiming that a plan to cut up to $3 trillion in spending will stimulate job growth, even though the foundation of their economic platform is “spend less, hire more”. Obama has parroted the GOP’s claim that “uncertainty” has been holding back job growth, but he’s largely talking about the uncertainty manufactured in Washington during the debt-limit debate.
It’s clear now that the biggest failure for Obama and Congress in regards to the debt limit – and the most harm for the U.S. economy – isn’t contained in the structure of the final deal. It’s the fact that Washington just spent several months wholly distracted from a recovery that was sputtering dangerously back toward another recession.
To borrow some Wild West imagery, lawmakers loaded up a stagecoach with school kids a few months ago, spurred the horses, sent them all racing toward a cliff, and, at the last moment, stopped them from flying into a ravine. Meanwhile, back at the ranch, cattle rustlers waltzed in and made off with the herd.
Economists call that an “opportunity cost” – the notion that what you spend on an action includes the value of what you could have been doing instead – and this one is particularly steep.
In the time that lawmakers consumed themselves with the question of whether or not to allow the federal government to default on its debt, private-sector job growth stagnated. The Commerce Department reported gross domestic product grew only 1.3 percent in the second quarter, and it revised its estimate of first-quarter growth down to 0.4 percent. The grim news continued on Monday, when the ISM Manufacturing Survey, a closely watched measure of industrial activity, checked in well below analyst expectations. Some economists began to revise their third-quarter growth projections downward as a result.
That’s likely why Monday’s early Wall Street rally, spurred by the debt-deal news, turned so quickly to another retreat: Before markets opened in New York on Monday, analysts were warning that avoiding a default or even a credit downgrade didn’t address the real problems in the recovery.
“The market is likely to trade relief if a government shutdown is avoided,” Goldman Sachs analysts wrote. “But for that relief to persist and extend, the economic news will need to look better than it has.”
Maybe now everyone in Washington can get around to working on that.
This article appears in the August 1, 2011 edition of National Journal Daily PM Update.