Govt putting US economy at risk

Slow recovery

But the pace of recovery since the 2008-09 recession has been unusually slow.

While the US' economic output is now higher than it was before the recession, the level of private investment remains lower than it was in 2007. Employers also continue to hire workers at a slower pace than before the recession.

Since the financial crisis eased, Washington has sent out one jolt after another. Democrats passed sweeping reforms to the healthcare system and the financial sector in 2010 that, whatever their merits, imposed significant changes on two pillars of the US' post-industrial economy.

Public unease with the healthcare law helped Republicans win control of the House of Representatives in 2010, ushering in an era of divided government that has led to repeated standoffs over taxes and spending.

A near-shutdown in April 2011 led to the debt-ceiling impasse in July and August of that year, which took the country to the edge of default and prompted its first debt downgrade.

As in the most recent crisis, Congress averted disaster at the last possible moment. But the brinkmanship pushed consumer confidence to rock-bottom levels, where it remained for months. The S&P 500 tumbled 17 percent and took more than six months to recover its gains.

That debt-ceiling deal called for steep cuts to national defense, highway construction, scientific research and other forms of discretionary spending that Congress must approve annually.

Another budget deal this year, reached in January after another round of brinkmanship, included tax increases to help narrow budget deficits further.

Neither of those deals addressed the health and retirement spending that poses the greatest threat to the country's long-term fiscal health.

Failure to cut back these programs or find savings elsewhere prompted a round of deliberately disruptive across-the-board spending cuts — the so-called sequester — to take effect in March.

Along with an improving economy, the measures helped US budget deficits fall from 8.7 percent of GDP in the 2011 fiscal year to an anticipated 3.9 percent of GDP for the fiscal year that ended on Sept 30.

But this has all come at a steep cost.