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

    US, Somalia Launch New Chapter in Relations

    US sends first ambassador to Somalia in 25 years; diplomatic presence and forces pulled out in 1993, after 18 US soldiers were killed when militiamen shot down military helicopter

    Brexit Vote Ripples Across South Asia

    Experts say exit is likely to have far-reaching economic, political and social implications for a region with deep historic ties to Britain

    Russian Military Tests Readiness With Snap Inspections

    Some observers see surprise drill as tit-for-tat response to NATO’s recent multinational military exercises in Baltic region

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Testing Bamboo as Building Materiali
    X
    June 27, 2016 9:06 PM
    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Testing Bamboo as Building Material

    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Orphanage in Iraqi City Houses Kids Who Lost their Parents to Attacks by IS

    An orphanage in Iraqi Kurdistan has become home to scores of Yazidi children who lost their parents after Islamic State militants took over Sinjar in Iraq’s Nineveh Province in 2014. Iraqi Kurdish forces backed by the U.S. airstrikes have since recaptured Sinjar but the need for the care provided by the orphanage continues. VOA’s Kawa Omar filed this report narrated by Rob Raffaele.
    Video

    Video Re-Opening Old Wounds in a Bullet-Riddled Cultural Landmark

    A cultural landmark before Lebanon’s civil war transformed it into a nest of snipers, Beirut’s ‘Yellow House’ is once again set to play a crucial role in the city.  Built in a neo-Ottoman style in the 1920s, in September it is set to be re-opened as a ‘memory museum’ - its bullet-riddled walls and bunkered positions overlooking the city’s notorious ‘Green Line’ maintained for posterity. John Owens reports from Beirut.
    Video

    Video Brexit Resounds in US Presidential Contest

    Britain’s decision to leave the European Union is resounding in America’s presidential race. As VOA’s Michael Bowman reports, Republican presumptive nominee Donald Trump sees Britain’s move as an affirmation of his campaign’s core messages, while Democrat Hillary Clinton sees the episode as further evidence that Trump is unfit to be president.
    Video

    Video New York Pride March A Celebration of Life, Mourning of Loss

    At this year’s march in New York marking the end of pride week, a record-breaking crowd of LGBT activists and allies marched down Manhattan's Fifth Avenue, in what will be long remembered as a powerful display of solidarity and remembrance for the 49 victims killed two weeks ago in an Orlando gay nightclub.
    Video

    Video NASA Juno Spacecraft, Nearing Jupiter, to Shed Light on Gas Giant

    After a five-year journey, the spacecraft Juno is nearing its destination, the giant planet Jupiter, where it will enter orbit and start sending data back July 4th. As Mike O'Sullivan reports from Pasadena, California, the craft will pierce the veil of Jupiter's dense cloud cover to reveal its mysteries.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.
    Video

    Video Tunisian Fishing Town Searches for Jobs, Local Development Solutions

    As the European Union tries to come to grips with its migrant crisis, some newcomers are leaving voluntarily. But those returning to their home countries face an uncertain future.  Five years after Tunisia's revolution, the tiny North African country is struggling with unrest, soaring unemployment and plummeting growth. From the southern Tunisian fishing town of Zarzis, Lisa Bryant takes a look for VOA at a search for local solutions.
    Video

    Video 'American Troops' in Russia Despite Tensions

    Historic battle re-enactment is a niche hobby with a fair number of adherents in Russia where past military victories are played-up by the Kremlin as a show of national strength. But, one group of World War II re-enactors in Moscow has the rare distinction of choosing to play western ally troops. VOA's Daniel Schearf explains.
    Video

    Video Muslim American Mayor Calls for Tolerance

    Syrian-born Mohamed Khairullah describes himself as "an American mayor who happens to be Muslim." As the three-term mayor of Prospect Park, New Jersey, he believes his town of 6,000 is an example of how ethnicity and religious beliefs should not determine a community's leadership. Ramon Taylor has this report from Prospect Park.
    Video

    Video Internal Rifts Over Syria Policy Could Be Headache for Next US President

    With the Obama administration showing little outward enthusiasm for adopting a more robust Syria policy, there is a strong likelihood that the internal discontent expressed by State Department employees will roll over to the next administration. VOA State Department correspondent Pam Dockins reports.
    Video

    Video Senegal to Park Colorful ‘Cars Rapides’ Permanently

    Brightly painted cars rapide are a hallmark of Dakar, offering residents a cheap way to get around the capital city since 1976. But the privately owned minibuses are scheduled to be parked for good in late 2018, as Ricci Shryock reports for VOA.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9092
    JPY
    USD
    101.65
    GBP
    USD
    0.7583
    CAD
    USD
    1.3047
    INR
    USD
    67.954

    Rates may not be current.