News / Economy

Report: Recurring Financial Crises Hurt US Economy

FILE - Dark clouds pass over the Capitol in Washington.
FILE - Dark clouds pass over the Capitol in Washington.
VOA News
A new economic analysis has concluded that the U.S. has significantly damaged its economy over the last several years by lurching from one financial crisis to the next.

The Macroeconomic Advisers research firm says that financial policy uncertainty and diminished consumer spending has annually cost the American economy, the world's largest, one percentage point of economic growth since late 2009.  

The report said repeated down-to-the-wire government spending and tax decisions have resulted in more than 2 million lost jobs and have pushed the U.S. unemployment rate six-tenths of a percentage point higher than it otherwise would be. Although it gradually has been falling, the U.S. jobless rate is still at an elevated 7.3 percent as the American economy struggles to regain strength from the depths of its worst economic downturn since the 1930s.

The author of the report, economist Joel Prakken, said Washington's long-running conflict over the role of government in American life has led to continual legislative disputes over spending and taxation policies.

"There's a dispute in Washington about the longer-run vision of the role of government in American society. And since no agreement can be reached on that long-run view, we're left with a laser-like focus on near-term fiscal policy because of the need on a regular basis to re-appropriate funds for the discretionary part of the federal budget," he said.

U.S. President Barack Obama, a Democrat, and his Republican opponents in Congress are facing twin financial crises at the moment. They are trying to reach an agreement on ending a 15-day partial government shutdown and increasing the country's $16.7-trillion borrowing limit by Thursday so the U.S. avoids defaulting on its financial obligations.

Prakken said the government shutdown already has cost the U.S. economy three-tenths of a percentage point of growth in the last three months of the year, and that failure to increase the debt ceiling would be calamitous. He said a short-term default would push the jobless rate to 8.5 percent and cost 2.5 million jobs, while a longer default would be even worse.

He said no one knows with certainty what might happen if the U.S. endures a large-scale default, but that the world economy and financial markets could be left in turmoil.

"It's a scary scenario, one we don't want to learn about first-hand. It's true that the results and these kind of estimates are speculative, but we don't want to find out," said Prakken.

The current Washington dispute over government spending priorities and increasing the U.S. borrowing limit follows a contentious debt ceiling dispute in August 2011 that slowed economic growth at the time and led one financial services firm to downgrade the U.S. credit rating.

At the end of last year, Obama and Congress engaged in a lengthy debate over tax rates that was settled at the last minute with taxes being increased on the wealthiest Americans.

You May Like

China Investigates Former Powerful Security Chief

Former security chief and member of Politburo Standing Committee, Zhou Yongkang, under investigation for suspected 'serious disciplinary violation' More

India, US Look to Reset Ties During Kerry Visit

This week's talks will be first high level interaction between two countries since Prime Minister Narendra Modi took charge More

Video Young African Leadership Program Renamed to Honor Mandela

YALI program, launched by President Obama in 2010, aims to build skills in business, entrepreneurship, public management and civic leadership More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Vietnamese Staging Chinese Product Boycott After Oil Rig Spati
X
Reasey Poch
July 28, 2014 7:18 PM
China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video ESA Spacecraft to Land on a Comet

After a long flight through deep space, a European Space Agency probe is finally approaching its target -- a comet millions of kilometers away from earth. Scientists say the mission may lead to some startling discoveries about the origins of the water on earth. VOA’s George Putic has more.
Video

Video Young Africans Arrive in US for Leadership Program

President Barack Obama's Young African Leadership Initiative has brought hundreds of young Africans to the United States for a six-week program aimed at building their knowledge and skills in fields such as public administration and business. Out of the 50,000 young Africans who applied for the program, just one percent was accepted. VOA's Laurel Bowman caught up with some of those who made the cut and has this report.
Video

Video In Honduras, Amnesty Rumors Fuel US Migration Surges

False rumors in Central America are fueling the current surge of undocumented young people being apprehended at the U.S. border. The inaccurate claims suggest the U.S. will give amnesty to young migrants from the region. As VOA's Brian Padden reports from Honduras, these rumors trace back to President Obama's 2012 executive order to halt deportations for some young undocumented immigrants already living in the United States.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.