|Message to Congress: It's Time to End the Madness
A blog post from AAIA's Aaron Lowe
There is a surreal feeling in the nation's capital this week as Congress decided last week to shut the federal government down due to the continued strong opposition to the Affordable Care Act (ACA). The newspapers and television news are focused on the closing of many of our tourist sites and national parks; and of course, the furlough of many federal workers. For many of my neighbors, it was a day off to enjoy the great fall weather we are experiencing in Washington, although most federal employees I talked to found the entire situation frustrating. For AAIA, the traffic was a little lighter for the staff (although not as light as we thought it would be), and we acknowledged the fact that meetings and phone calls with federal officials were not going to occur any time soon.
The truth is that short term, the shutdown of the federal government is not going to be the end of the world. If a Continuing Resolution is enacted soon, life will be back to "normal" here relatively quickly. The problem is that there appears to be no end in sight to the funding issue and the long-term impact on the economy of a closing could be huge. While initially the furloughing of the nearly 800,000 federal workers (less now with the Department of Defense calling back a large number of its workers late last week) and the closing of offices, parks and museums may cost the U.S. about $300 million a day in lost economic output, according to IHS Inc., a market research firm, that cost will multiply over time as consumers and businesses defer spending. IHS further estimates that predicted 2.2 percent annualized growth in the fourth quarter will be reduced to .2 percentage point in a weeklong shutdown. Further, although the last shutdown in 1995 did not have a huge negative impact on the economy, our current economy is not even close to being as solid as it was back then, making us more vulnerable to the economic costs of the shutdown.
As bad as a shutdown is for the economy, failure to raise the debt ceiling before the Treasury runs out of borrowing authority could be much worse. While no one really knows the full impact of the federal government defaulting on its loan obligations, the last time we almost got there in 2011 was a disaster for the stock market. The Dow Jones Industrial Average dropped more than 700 points in the month preceding the approval by Congress of a bill to increase the debt ceiling. Such a drop right now, not only could wipe out the tepid recovery, but possibly send us into another recession or worse.
AAIA has joined most of the major business groups in Washington, including the U.S. Chamber and the National Association of Manufacturers, in calling for Congress to resolve the current budget crisis. We strongly believe that efforts need to be made to bring the budget deficits under control and it is important to address problems with ACA; but that it is critical that such action be done in a responsible manner, which means not shutting down the federal government and certainly not preventing an increase in the debt ceiling.
Clearly, the nation faces some major fiscal issues that need to be addressed. However, if the economy goes into another tailspin as a result of efforts attempting to solve those issues, than we will have new and bigger issues to contend with. Our leaders in Washington need to look at the bigger picture and find a way to resolve their differences. Our members a
nd their customers' economic future are clearly on the line if they don't.