U.S. Debt Default Risk: Congress Is “Playing with Fire” Says Obama Adviser
The 16-day government shutdown in October cost taxpayers at least $2.5 billion, according to a report released late Thursday from the White House. That includes $2 billion paid to government employees who weren't working and $500 million in lost fees at national parks that were closed.
The total impact is even greater if you include private government contractors who lost pay, the $4 billion in tax refunds that individuals didn't receive, the backlog in veterans' disability claims and the costs of shutting and reopening the government.
"The government shutdown itself had so many broad-based impacts that hurt people," Gene Sperling, assistant to the president for economic policy, tells The Daily Ticker. "It wasn't just government employees. It was small-business contractors -- even people going through cancer clinical trials."
Related: U.S. Economy Adds 204,000 Jobs in October But What Comes Next Really Matters: Gene Sperling
But the shutdown apparently didn't hurt the job market as much as had been expected. Employers added 204,000 to payrolls in October and the unemployment rate rose slightly, to 7.3% from 7.2% in September.
One reason for the discrepancy: The Labor Department, which compiles the jobs report, counted furloughed government workers as working for the purposes of the payroll number, but counted them as unemployed in the household survey, which is the basis for the jobless rate. The November jobs data could also be skewed as a result of the shutdown.
Related: Why the Shutdown Won't Derail the Economy
The government risks another shutdown if Congress can't pass legislation to continue to fund the government. That's what happened in October and it could happen again when funding runs out in mid-January. After that, the next big deadline is Feb. 7, when the extension of the debt ceiling expires.
"As harmful as another government shutdown is, another risk of default or an actual default would be so much more damaging, so much more harmful...putting us in so much risk of going into recession," says Sperling, who's also director of the National Economic Council. "I hope that more and more members of Congress do understand that we're playing with fire here."
Related: Does Wall Street Believe the U.S. Could Default?
In the meantime Democrats and Republicans have convened another "supercommittee" to try to reach a budget deal and avoid a second round of spending cuts known as the sequester. No signs yet that there will be a new budget deal by the committee's Dec. 13 deadline, but Sperling is somewhat hopeful.
"You have something we haven't seen for a while -- Democrats and Republicans going to a good old-fashioned conference committee to try to work out an agreement," he says.
Watch the video above for more on what the White House is willing to negotiate to get a budget agreement.
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