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The Government Shutdown: Short-term Pain, Long-term Disaster


OK, now I'm upset. Every workday morning I fire up my computer, log onto the Internet, and read all of the relevant economic data releases for that day. But when Congress decided to allow the shutdown of the federal government yesterday, one of the many bureaus that was closed was the Census Bureau. And since nobody is currently working at the Census Bureau, there is nobody there to release the data that they usually report every month.

Now, it is hard enough to figure out what is going on in the U.S. economy with the steady stream of data that we usually get. It is going to be nearly impossible to figure out what is going on without government data.

Today's missing data was the monthly report on construction spending, and later this week is the scheduled monthly release of the critical employment data. Both of these data series are under close scrutiny at the present time because both of them are crucial indicators of our nation's overall economic health, and both of them were starting to show some promising trends in recent months.

The economic recovery in the U.S. is still sputtering, but the recent trends of gradual improvement in the construction sector and the employment data have lifted consumer confidence. It is important that these trends continue, but we need the data for verification. Data gathering and reporting is one of the useful and inherently governmental functions for which citizens pay taxes. Neither companies, nor markets, nor economies, nor governments can run properly without information.

And make no mistake about it…the next few months are a critical time in the U.S. economic recovery. And it pains me to say that the actions of Congress are going to play a crucial role. A shutdown of a day or two will result in some loss wages in the government sector. Not a good outcome by any means, but something from which we can still recover without too much difficulty. But a longer shutdown will do some real damage.

From a purely philosophical perspective, I can appreciate the concept of shutting down the federal government and sending them all home. I truly believe that the net effect of having them in place has been negative in recent years. Put simply, I have no love for Washington DC. But the reality is that if we are to achieve the laudable goal of downsizing the government, then we must do it in a tapered manner that is highly organized and well publicized.

The great irony in all of this is that it is actually going to cost the U.S. taxpayers $800 million for every day that the government is shut down. That's right, by doing this in such a clumsy and ill-advised manner, it is actually going to cost us even more money.

I am mad, but I am not crazy. This method will not work, and in the elections next year we must vote out any member of Congress who thinks that this current shutdown of the federal government is the right thing to do. We can and must shrink the government for our nation's long-term prosperity. But we cannot crash it and then stand back and claim that it is fixed.
 

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