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Costs of Shutdown Too High, Fiscal Games Must End

Washington, D.C.– The cost of the government shutdown was too high, and policymakers should consider reforms to end these types of budget battles in the future.

“The harmful, wasteful government shutdown that finally ended today demonstrates again the dire consequences for Americans and the U.S. economy of engaging in such destructive brinkmanship,” Shai Akabas, BPC’s director of economic policy, said.

“While policymakers try to hammer out a deal by February 15, they should also consider reforms to prevent repetition of these types of budget battles and fiscal games,” he said.

Complicating matters, shortly after the budget deal expires on February 15, the debt limit will be reinstated on March 2, with the government on course to default on its obligations later this year absent congressional action.

“Government shutdowns are costly, but the stakes are much higher for the debt limit. If policymakers are unable to deal with the debt limit in time, the consequences could be catastrophic for the global economy,” Akabas said.

Playing political games with the shutdown and debt limit must be removed as a negotiating tactic – it is too dangerous for the country’s economy. Policymakers have already begun to discuss reforms to eliminate the risk of shutdowns, but they should expand their efforts to include the debt limit as well.

“While we look at mechanisms to prevent crippling shutdowns, BPC is also working on solutions that would de-weaponize the debt limit and address the nation’s ever-deteriorating long-term fiscal outlook,” Akabas said.

New analyses from the Congressional Budget Office, published today, make clear the need for reform. The long-term fiscal trajectory of the nation is untenable. In CBO’s projections, annual deficits will near or exceed $1 trillion in each of the next 10 years, and the economic costs of this latest shutdown – coming to at least $11 billion in lost economic activity – have only aggravated the problem.

“Despite partisan clashes of the past few years, we believe a bipartisan solution to these problems is possible, given proper leadership,” Akabas said. “To do this, policymakers should start by reforming the budget process, ending shutdowns, and finally putting the debt limit risk to rest.”

Shai Akabas is available for comment.

BPC commentary from G. William Hoagland:

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