Baum on Money: Pricing the Shutdown
Good morning, all. Here are some stories on the U.S. economy to digest with your breakfast:
Assessing the damage
The President's Council of Economic Advisers has released a report on the cost of the 16-day government shutdown and "default brinkmanship." Using a weekly data index it created from eight data series that weren't affected by the shutdown -- indicators such as jobless claims, confidence and mortgage applications -- the CEA estimates that the shutdown will pare 0.25 percentage points off the annualized GDP growth rate in the fourth quarter and reduce private sector jobs in the first two weeks of October by 120,000. The CEA paper walks you through the construction of the index and regression analysis, which is yours to decipher.
What did the White House know?
White House press secretary Jay Carney hasn't been very forthcoming at his daily briefing on who knew what, when, about the malfunctions on the government's health insurance website. Slate's Matt Yglesias suspects the White House knew very little. What was a key selling point for Obamacare has now become an embarrassment. "Conservatives finally have a bona fide scandal dumped in their laps," Yglesias says. Will they be able to bounce back from their post-shutdown lows, or will Obama find a way to blame George W. Bush?
An ideal health-care system
The focus on the technical problems associated with the Healthcare.gov website makes it easy to forget about the health care plan itself. The Affordable Care Act increases access to care, but it fails to improve the overall system, according to the Mercatus Center's Robert Graboyes. If the ultimate goal of a health care system is "to provide better health to more people at a lower cost on a continuous basis," the ideal system would feature consumer choice, provider autonomy, transparent prices and reduced red tape. It would encourage innovation rather than create disincentives. And don't forget bending the cost curve, which under Obamacare is almost certain to go in the wrong direction. The equation is simple: More demand for healthcare services + no incentives to increase supply = higher prices.
The good turns bad
Health care and restaurants were a major source of job creation last year. The employment report for September shows those two sectors winding down. A slower pace of health care spending may explain reduced health-care hiring, according to the New York Times' Economix blog. However, an outright decline in restaurant jobs may be a sign that consumers are cutting back on discretionary spending.
Fed tapering? 'Probably not soon'
That's what the Washington Post's Neil Irwin says on the time frame for the Fed to start winding down its asset purchases. September's weak jobs, which preceded the shutdown, only reenforced the lack of momentum in the labor market. Fiscal policy, if you can call it that, is still a big unknown. Throw in a changing of the guard at the Fed -- Janet Yellen, if confirmed, will take over from Ben Bernanke in January -- and economists are penciling in March for a likely first step. And that assumes the economy shows renewed signs of life.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)