Traverse City Record-Eagle


November 2, 2013

Fact Check: High cost of gov't shutdown

Some Democrats have taken to exaggerating the cost of the federal government shutdown, suggesting that it cost the economy nearly 1 million jobs, and claiming that it cost taxpayers $30 billion. Neither statement is accurate.

Sen. Heidi Heitkamp of North Dakota stated in an Oct. 18 TV interview with a local station, while discussing the impact of the just-concluded shutdown:

Heitkamp: (S)ome people are saying that the job implications may go as high as almost 1 million jobs. That is just not a path forward.

Heitkamp’s 1 million figure is four times larger than the highest estimate we’ve seen so far from any economist for job losses due to the shutdown.

She didn’t specify the source of her figure. However, the source is probably a study released only four days earlier by the Peter G. Peterson Foundation under the headline, “Fiscal Policy Uncertainty has Resulted in 900,000 American Jobs Lost.” That study, however, was not an estimate of the job cost of the 16-day shutdown alone. It attempted to estimate “the cost of crisis-driven fiscal policy over the past few years.”

That report was prepared for the foundation by Macroeconomic Advisers LLC, and it estimated the effect of “fiscal policy uncertainty” including Standard & Poor’s first-ever downgrading of U.S. federal debt in August 2011 (after the last debt-ceiling showdown), and the “fiscal cliff” showdown in December 2012, as well as the recent shutdown.

Update, Oct. 22: After we posted this item, the White House released a report by its own Council of Economic Advisers citing economic indicators that it said are “consistent with” a conclusion that the shutdown slowed job growth by “about 120,000 private-sector jobs in the first two weeks of October.” The CEA said that figure “could understate the full economic effects of the episode to the degree it continues to have an effect past Oct. 12th.” Still, that’s a fraction of the 1 million figure Heitkamp cited.

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