Two things to note:
- I sound like a broken record at this point, but this is every bit as much a political crisis as it is an economic crisis. Look, even if you don't agree with me about what the government should do to foster job growth, you probably think there's something the government can do to foster job growth. Even if, in your case, "something" means "close its doors and strike all regulations." But no proactive action is being taken at all, in either direction. Congress is fiddling while the economy burns. It doesn't really have a choice, because both sides are perfectly capable of blocking the other and will do so until the end of time. It's total paralysis, born not out of political irresponsibility (but it helps! I'm talking to you, Eric Cantor!), but out of institutional design. We've known this was coming for a while, and now, it's here.
- Which is not to say that neither side is getting what it wants. The endless recession is the greatest boon small-government conservatives could have asked for. It's accomplishing what twenty years of ideological warfare could not: a sustained and dramatic reduction in the size of government. The results, predictably, have been dismal. As Yglesias points out, if conservatives were to be believed, the slow erosion of government would lead to an explosion of private sector opportunity. But it turns out conservatives are dead wrong about this, like most everything else. So the Republican-led cuts in government just mean that depressed job figures get even worse. This month, the decline in government jobs actually canceled out private sector job growth altogether. But you know, arg blargh crowding out and regulatory uncertainty and all that. You really nailed it, guys.