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How Budget Battles Keep The Economy In Limbo

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How Budget Battles Keep The Economy In Limbo

How Budget Battles Keep The Economy In Limbo

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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When some two million federal employees show up for work tomorrow, they'll be starting a new fiscal year. And once again, they will head into a 12-month budgeting cycle amid uncertainty about government shutdowns and cutbacks. And that uncertainty affects more than just federal workers.

NPR senior business editor Marilyn Geewax joins us to explain how the failure of Congress to complete a budget by October 1st can hurt car dealers, home sellers, store owners and, you know, all the rest of us.

Welcome to the program, Marilyn.


CORNISH: So, before we talk about the broader economic impact, please remind us, where is Congress on the fiscal 2012 budget?

GEEWAX: Congress is where it almost always is in early October - its way behind schedule. It's supposed to complete a one-year budget by October 1st. But really, since the 1970s, that deadline has been met only a couple of times. So here we go again.

Last week, lawmakers agreed to a stopgap spending bill to keep government open until Tuesday. And then on Tuesday, they'll take up another extension, and this one would keep government operating through mid-November. But it'll be months before the full budget process is completed.

CORNISH: The annual budget process has become such a circus.


CORNISH: And it's so routine that that it's a circus and we all pretty much accept it as normal. But what do economists say about the impact of that?

GEEWAX: I called up a bunch of top economists this past week to ask them that question, and see what they're thinking. And I got very consistent response: They all say that this is a broken process that's hurting individuals and businesses very directly.

CORNISH: OK, what does that mean in detail? How?

GEEWAX: Well, let's just start with that immediate impact on the more than two million people who work for the Federal Government. This year, they have been threatened several times with shutdowns, and some of them actually did lose their paychecks for a while.

Remember this past summer, there was a congressional dispute over the FAA funding and it resulted in a partial shutdown of that agency. About 74,000 workers and contractors in the aviation sector ended up losing their paychecks for a couple of weeks while lawmakers were arguing.

And that put a damper on their spending. Should they go ahead and buy a car? Do you make a down payment on a new house? At the time when car dealerships and realtors really need people to be feeling as confident as possible, that kind of uncertainty certainly didn't help.

CORNISH: Okay, but most people are not federal employees. So how does this affect the rest of us?

GEEWAX: The government affects our lives in all kinds of ways. Let's just go back to that example of the FAA dispute. It directly hurt the FAA workers who were laid off. But the bigger story here is really that all passengers have to deal with costly flight delays because the FAA hasn't had the budgetary direction they need to modernize the whole air-traffic-control system.

FAA wants to replace its World War II-era radar technology with much more advanced equipment that would speed up air travel. But the agency needs a stable, long-term funding to make those kinds of decisions, and it hasn't had that.

And it's not just the money, it's also the squandering of time and talent.

CORNISH: So what do you mean by that? I mean how could you quantify that?


GEEWAX: Well, you know, FAA leaders can't focus on planning for next generation technology when they have to spend their time making contingency plans for shutdowns, deciding which workers are essential, which ones are non essential. And, of course, that's pretty demoralizing for the employees who have to go through that process. The best ones may end up leaving government just to avoid this constant drama that involves Congress.

CORNISH: Is this problem though really any worse than usual?

GEEWAX: I think that economists would say yes, it really is worse this year because the economy is so fragile right now. The European governments are struggling, they have all kinds of political problems with their economy. So investors around the world would like to see some clarity and direction from Washington. The fact that we're starting another fiscal year without a budget is a confidence killer.

CORNISH: NPR senior business editor Marilyn Geewax. Marilyn, thanks.

GEEWAX: You're welcome, Audie.

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