Goldman Sachs to Dem leadership: We didn't say a shutdown would harm the economy

Democrats seem particularly interested in whipping up hysteria over Republican budget proposals and a potential government shutdown.  Over the weekend, Nancy Pelosi accused the GOP of starving 6 million seniors in cuts to a program that services less than 2.5 million of them — and for cuts that aren’t even specified for the program anyway.  Today, Goldman Sachs responds to Harry Reid and Dick Durbin’s contention that a shutdown will damage the economy supposedly based on one of their analyses:

Senate Majority Leader Harry Reid, D-Nev., and Majority Whip Dick Durbin, D-Ill., said on Thursday that a weeklong shutdown could shave 0.2 percent off the growth of gross domestic product, citing a Goldman Sachs estimate.

But Phillips dismissed that interpretation, stressing that the research Goldman did in the days leading up to the last continuing resolution’s passage—near the end of the 1st quarter—had more to do with the effects of pushing economic activity from one quarter into another.

“We never said that,” Phillips said in response to Durbin’s comment. “There was one kind of back-of-the-envelope estimate of a couple months ago that a week of shutdown would [cost] as much as eight-tenths of a percent, so maybe that’s where it came from, but I would not use that estimate.”

The estimate, he explained, “was relative to the 1st quarter; the issue was if you push stuff from March into April, you can [affect GDP numbers] for the quarter.”

By contrast, a potential shutdown now, at the beginning of the 2nd quarter, would long be settled before this quarter ends in June.

In other words, a shutdown would only have an economic impact while the shutdown occurs, and have no lasting effects otherwise.  People impacted would just postpone activity rather than cancel it.  It’s less relevant to the economy and its performance than the policies over which the budget impasse is being fought.

Reid and Durbin are either ignorant of economics or purposefully misrepresented Goldman Sach’s analysis to stoke hysteria.  Two days ago, Nancy Pelosi just cut through the hysteria on budgets altogether and said that Democrats should just embrace being the Party of No Plan:

Pelosi — who is widely viewed as the person most responsible for ensuring that Dems drew a hard line against Bush’s privatization proposals — said that so doing would have persuaded people that there must have been something wrong with Social Security that needed fixing. She suggested that Dems should keep that message in mind as they prepare to do battle over Ryan’s Medicare proposals.

“We got criticized for it, but it was the most important thing,” Pelosi said. “We couldn’t have our own proposal on Social Security because it would confuse the public.”

Pelosi said that so doing would have meant Dems were “conceding there must be some big problem.” She characterized the Dem message at the time as follows: “We have a proposal on the table: It’s called `Social Security.’ The President has something on the table: It’s called `privatization.’”

And in 2010, Pelosi tried doing the same thing with the full budget, which is why we are at an impasse today.  Looks like the Party of No Plan will continue its strategy, and hope Americans just prefer to see everything in DC collapse.

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David Strom 3:21 PM on March 24, 2023