Goldman Sachs are reported to be claiming that the 'shutdown' of the US Federal Government is costing the US Economy more than $300M a day! Yes, a day!
As with many news stories, no supporting data is offered - just a self-serving soundbite. Here's a tip for lazy journalists - ask the questions - how is that number supported and from where do the numbers come?
So let's try to think about it on a simple level.
The US Government is not spending money (money that it doesn't anyway have!) and it is doing this by putting employees on unpaid leave. Is this the >$300M that is hitting the US economy? If so, how?
What is the saving to the US economy by not having to borrow money to pay these furloughed employees? Is that shown as a negative in the calculation?
The US military, Homeland Security and the FBI are not sending drones into the skies, to spy on the American people - so that means that they aren't spending money on foreign oil - presuming that the cost is predominantly for the product and not for the US middle-man's profit element, how does that affect the US economy?
The EPA and other federal agencies are not issuing their usual reams of regulations that impose cost burdens on US business - is that cost benefit included in the $300M number?
Surely the $300M can't be the daily cost for putting up barriers at places like the WWII memorial to stop veteran's visits?
I can't believe that the GS number includes taxes and fines and penalties that are not collected, during the shutdown - surely these are simply deferred so no net impact (and they are zero sum anyway!
Here's another question for GS and Wall Street readers - We have heard all sorts of anecdotal evidence from companies across the US, citing by how much their health care costs will rise (and so profits and shareholder returns fall) as a result of the Affordable Care Act (Obamacare) but how much do you think this will take out of the US economy? Is it a zero sum game? So every $ of additional premiums that companies must pay is considered to remain sloshing around in the economy but just being transferred from other parts to the health care and insurance sectors? Or is this wealth extraction from business seen as destructive to America's ability to invest?
If the GS numbers are correct, think about what that says about the US and its economy. That the government is such an integral part of the economy that it starts to resemble and mirror the effects that the Soviet and it's satellites had on their economies - they become a or the key component in economic activity and so important that they feed their own destruction.
Of course, maybe GS are right and the number is correct but what would be the actual impact on the economy? We all know that past shutdowns have led to real measured improvements in GDP so maybe the longer the shutdown, the better the benefit. Since though this kind of positive data feeds into the 'smaller government is good' narrative, I can kind of understand why GS emphasizes the opposite.
As with many news stories, no supporting data is offered - just a self-serving soundbite. Here's a tip for lazy journalists - ask the questions - how is that number supported and from where do the numbers come?
So let's try to think about it on a simple level.
The US Government is not spending money (money that it doesn't anyway have!) and it is doing this by putting employees on unpaid leave. Is this the >$300M that is hitting the US economy? If so, how?
What is the saving to the US economy by not having to borrow money to pay these furloughed employees? Is that shown as a negative in the calculation?
The US military, Homeland Security and the FBI are not sending drones into the skies, to spy on the American people - so that means that they aren't spending money on foreign oil - presuming that the cost is predominantly for the product and not for the US middle-man's profit element, how does that affect the US economy?
The EPA and other federal agencies are not issuing their usual reams of regulations that impose cost burdens on US business - is that cost benefit included in the $300M number?
Surely the $300M can't be the daily cost for putting up barriers at places like the WWII memorial to stop veteran's visits?
I can't believe that the GS number includes taxes and fines and penalties that are not collected, during the shutdown - surely these are simply deferred so no net impact (and they are zero sum anyway!
Here's another question for GS and Wall Street readers - We have heard all sorts of anecdotal evidence from companies across the US, citing by how much their health care costs will rise (and so profits and shareholder returns fall) as a result of the Affordable Care Act (Obamacare) but how much do you think this will take out of the US economy? Is it a zero sum game? So every $ of additional premiums that companies must pay is considered to remain sloshing around in the economy but just being transferred from other parts to the health care and insurance sectors? Or is this wealth extraction from business seen as destructive to America's ability to invest?
If the GS numbers are correct, think about what that says about the US and its economy. That the government is such an integral part of the economy that it starts to resemble and mirror the effects that the Soviet and it's satellites had on their economies - they become a or the key component in economic activity and so important that they feed their own destruction.
Of course, maybe GS are right and the number is correct but what would be the actual impact on the economy? We all know that past shutdowns have led to real measured improvements in GDP so maybe the longer the shutdown, the better the benefit. Since though this kind of positive data feeds into the 'smaller government is good' narrative, I can kind of understand why GS emphasizes the opposite.
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