Tuesday, January 10, 2012

How the debt limit debacle hurt the economy

(click image to embiggen)

From TPM comes this great graph that shows what last summer's debt limit fight did to our economy:
Last week’s surprisingly positive jobs report overshadowed another bit of good news for the economy: last November showed the biggest growth in consumer credit in 10 years. Typically that’s a sign that consumer confidence is up, banks are willing to lend, and demand is on the rise.

If you look back at recent monthly data, though, you’ll see that this particular green shoot should have poked through the ground months ago, but was stymied by the GOP’s debt ceiling hostage drama.

If you recall, that debt ceiling debacle was a completely manufactured crisis - manufactured by House Republicans - which ended up dropping America's credit rating for the first time in our history.

Raising the debt ceiling has always been a routine matter - if one which frequently gives rise to plenty of partisan rhetoric - under both Democratic and Republican presidents. Sure, both parties make political hay with it when they're in the opposition, but until now, there's never been any question that it would ultimately pass.

After all, it doesn't affect government spending in the slightest. This is just saying that we'll pay the bills we already owe. And if we defaulted, it would be positively disastrous for our country. Until now, politicians have tended to put America first, when it really mattered.

But a continued bad economy helps the Republicans. Partly, that's because the president is a Democrat, and no matter what, the president almost always gets the blame for a poor economy (even when he inherited an even worse economy, as President Obama did).

But Republicans also run as the anti-government party. So everything they can do to make Americans disgusted with their own government actually helps the GOP.

After three years of Republican obstructionism, only about 9% of the American people approve of Congress. But since Republicans campaign on how bad the government is, this actually helps them. Yes, it helps the very people who make Congress so dysfunctional in the first place. Ironic, huh?

In this case, we've been trying to claw our way out of the worst economic collapse since the Great Depression. As back then, this happened on the Republicans' watch. When Barack Obama took the presidency, the collapse was in full swing and appeared to have no bottom.

Well, he quickly stopped the collapse, although lagging economic indicators, like unemployment, continued to get worse for awhile. The deficit increased, too, because an economic collapse automatically increases expenses (like unemployment benefits) and decreases revenue (when incomes drop, so do income taxes). And although he gets no political credit from this, Barack Obama has actually been cutting taxes, mostly on the middle class.

But these things are working. We've been climbing out of this deep, deep hole. Unfortunately, the Republicans have been dragging their feet every step of the way, so it's been painfully slow. And in that graph, you can see the dent the debt limit fight did to consumer credit. It seems to have cost us a good three months of progress, minimum.

It also caused the stock market to crater, which certainly didn't help. And it could have - probably should have - increased our borrowing costs. However, the global economy is in such bad shape that interest rates are near zero (contrary to the regular forecasts of the right-wing). And the American dollar is still the soundest, the safest, and the most respected currency in the world - though maybe not for long, if this keeps up.

Because this is all deliberate. Republicans are desperately trying to sabotage the recovery, or at least to delay it until after the 2012 elections. As they've said many times, their #1 objective isn't jobs or even the deficit. It's to make sure that a Republican takes the presidency back this next fall.

It's hard to make much headway when one political party is actively trying to sabotage the recovery. As far as I know, this is unique in our history. And if Republicans aren't punished at the ballot box - indeed, if they're actually rewarded for this behavior - I fear for my country.

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