Email, response to PolitiFact Texas, Dean Baker, co-director, Center for Economic and Policy Research, Washington, Jan. 11, 2013

3:03 pm

I think the numbers on the additional cost to Treasury from the standoff are plausible, although most of this is yield spread, which is a bit speculative. In other words, the fall in the spread could certainly be attributable to uncertainties about the debt, but there are other factors, such as a strengthening economy, which could have the same effect. I think it is more questionable that the economy slowed due to this action. The main story in the economy over this period was the ending of stimulus, which would have been expected to slow the economy. If the debt standoff added to this, it is hard to see through what channel. There was no noticeable falloff in either consumer spending or investment demand. My guess is that most people assume that the people in Washington will work it out and plan accordingly. As a result, I don't think we will typically see much economic impact from one of these standoffs unless we actually reach a crisis point.

So I'd say Doggett is certainly on solid footing on interest costs, less so on slowing the economy.

3:20 pm

One could certainly argue about who deserves blame, but it is new to use the debt ceiling as a tool to extract major budget concessions. The Dems had used it to score a few political

points as I recall in 2007 (probably in the 80s as well) but they never came anywhere close to a default, nor did they get budgetary changes. It is really only the Republicans who have used it for this purpose. That

doesn't make it wrong, it's just not a game that both parties have played equally.

regards,

Dean