Budget battles cost 1 million jobs – economist
By Annalyn Kurtz
NEW YORK (CNNMoney) — Since the recession, Congress and President Obama have supposedly been focused on job growth, yet their squabbling may actually be killing jobs, according to estimates from economists.
Washington’s heated budget battles have already cost the economy at least 1 million jobs over the last few years, estimates Mark Zandi, chief economist for Moody’s Analytics.
How? Debates about stimulus in 2009, and the federal budget and debt ceiling since then, have created so much political uncertainty for businesses, entrepreneurs, banks and consumers, they’re all holding back.
“Businesses are more reluctant to invest and hire, and entrepreneurs are less likely to attempt startups,” Zandi said in written testimony before the Senate Budget Committee last week. “Financial institutions are more circumspect about lending and households are more cautious about spending.”
Political uncertainty, as measured by a Moody’s Analytics index, reached record highs during the debt-ceiling debate two years ago, and is now back on the rise.
Zandi estimates the unemployment rate would be around 6.6% now if political uncertainty had not increased since 2007. Unemployment currently stands at 7.3%.
His estimate coincides with separate research conducted by San Francisco Fed economists Sylvain Leduc and Zheng Liu, who say the unemployment rate would have been around 6.5% at the end of 2012, if it weren’t for an increase in political uncertainty.
The U.S. economy lost 8.7 million jobs between 2008 and early 2010, and has since gained back 6.8 million jobs.
As of August, about 11.3 million Americans remained unemployed.
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