The National Parks–Yellowstone, Yosemite, Great Smokey Mountains and all the rest—are shutting down, along with much of the government, because what Politico called a “hard-line faction of House GOP lawmakers” can’t accept the results of the last election or the fact that Congress enacted the Affordable Care Act. They are carrying obstructionism to a disastrous new low.

This is a personal nuisance, since my wife and I planned a seven-night stay in Yellowstone that would have started Saturday night. Luckily, we checked ahead and learned that, as this Q and A from Bloomberg News recounts, everyone will be kicked out of the park, vacation be damned!

“Q. What about my trip to Yellowstone?

A. You’re out of luck. According to the Interior Department’s shutdown contingency plan: “All areas of the National Park and National Wildlife Refuge Systems would be closed and public access would be restricted.”

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At the beginning of the year, Andrew Fieldhouse and I tried to document lots of the ways that the GOP House had managed to smother a full recovery from the Great Recession. The list was pretty impressive, but a key theme was that the GOP kept using the leverage of various fiscal decision points (reaching the debt ceiling, the expiration of tax cuts, the drawdown of the Recovery Act, etc…) to push for austerity on the spending side of government. And their tactic worked—the current economic recovery has seen historically slow growth in public spending, and by now the entire gap between today’s economy and a healthy one can be attributed to this austerity, full stop.

When we wrote our list, I had hoped any strategic gain to the GOP Congress stemming from throttling the recovery was over—the 2012 election had come and gone, and going forward from there it is not exactly obvious why slow economic growth is damaging to just one party or the other.

Obviously, I was wrong.

The new exploitation of external fiscal deadlines (the need for a “continuing resolution” to fund federal governmental operations after October 1 and reaching the debt ceiling in mid-October) concerns both a further ratcheting down of spending, but also the delay of the Affordable Care Act (ACA).

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Paul Krugman and Mark Thoma have been discussing (see here and here) the views of the (increasingly influential) very rich on this fall’s fiscal debate. They hypothesize that rising inequality has led to exorbitantly large incomes for a select few, and that these select few don’t understand the value of social insurance because they reap little-to-no benefits from programs like Medicaid, and SNAP, for example. The top 1 percent, after all, rarely realize the benefits of social insurance, since the likelihood that they experience unexpected income losses to the extent that they fall below the middle class living standards is slim. More often, social insurance benefits those who may be in the middle and lower classes, and experience unexpected income losses (like a lay off). Complaining about insurance simply because you don’t think you will need it is a pretty pithy argument, but let’s ignore that for now.

Thoma and Krugman go further, noting that rising inequality seems to have confirmed the top one percent’s notion that they are the indispensable economic engine of the U.S. economy, who take risks and work the hardest and should justly reap the benefits. They push for lower taxes (even though their current tax rate is one of the lowest in history) because they don’t think anything should impede their productivity, and they demand respect for being the “job creators” in society. In the context of this fall’s showdowns over the federal budget and the debt ceiling, not only is this take wrong, but it is totally divorced from the reality the broad middle-class faces—a reality of high joblessness from an anemic recovery, and meager wage growth over the last 30 years.

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EPI co-founder and board member Robert Reich has a new documentary, open in theaters nationwide today, called Inequality for All. Everyone should go see this important film.

The film explores the growth of economic inequality, and draws heavily on the work that EPI has done over the past 25 years.

In the decades following World War II, workers’ wages by-and-large rose alongside productivity. But since the 1970s, that relationship has broken down. While CEOs and financial executives have seen their pay skyrocket, wages have been flat for ordinary Americans (even those with a college degree) for the past decade. Add to that a minimum wage that has less purchasing power than it did in 1963 and it’s easy to see why Americans are concerned with economic inequality. It’s a challenge that came about thanks to policies set by those with the most economic power, and it’s something that can be fixed.

That’s why earlier this year, we launched inequality.is. The site walks you through how inequality affects you, how it affects the economy, how we created it, and what we can do to fix it. It even features a guest appearance from Robert Reich. (See also this blog post from Elise Gould for more about the site.)

Once you see Inequality for All, come back here for a more in-depth look at how this came about—and what we can do about it:

• A Decade of Flat Wages
• CEO Pay in 2012 Was Extraordinarily High Relative to Typical Workers and Other High Earners
• The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes
• Rising Income Inequality and the Role of Shifting Market-Income Distribution, Tax Burdens, and Tax Rates
• Fix it and forget it: Index the minimum wage to growth in average wages
• Occupy Wall Streeters are right about skewed economic rewards in the United States
• Failure by Design
• Everybody wins, except for most of us

On Twitter, Atrios demanded more talk of the platinum coin as a solution to the looming showdown over the debt ceiling. For those who don’t remember what the platinum coin idea is all about, check this out—a very good explanation of the issue, as well as a link to a good Chris Hayes segment on it.

But the thirty-second version runs like this: currently, to fund governmental activities, the Treasury draws on an account at the Federal Reserve. The account is fed by both tax revenues and the proceeds from selling bonds (debt). But, because the United States has a statutorily imposed limit of how much outstanding debt is allowed, once this limit is reached on issuing new debt, Treasury can no longer sell bonds and deposit these proceeds, and  hence the account at the Federal Reserve will dwindle. By October 17 (current guesstimate) it will be too small to finance that day’s governmental activities. A suggested way around this has been to have Treasury mint a coin (which has to be platinum for a reason too boring to note in depth) with a denomination of $1 trillion, deposit it at the Federal Reserve and, voila, governmental outlays can continue.

It’s true that the idea of minting a trillion dollar platinum coin as a solution to our nation’s problems sounds like something out of the Simpsons. But, the thing to realize is that while it is indeed a phony accounting solution, what it resolves is a phony accounting problem.

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In a recent speech marking the five-year anniversary of the financial crisis, President Obama hailed the falling federal deficit by pointing out that, “our deficits are going down faster than any time since before I was born.” The reduction in the deficit between 2012 and 2013—from 6.8 percent of GDP to 3.8 percent—is the largest deficit reduction in the past 60 years. Contrary to how too many pundits and politicians think about the economy, that’s not a good thing. This rapid contraction in the budget deficit has sucked purchasing power out of the overall economy even while it remains severely demand-constrained following the Great Recession.

The figure below shows the federal deficit, which has been steadily falling relative to GDP since 2009, versus the trend in the output gap, an indicator of how close to full recovery the economy is. The output gap is the difference between what economic output would be if resources were fully employed (potential output) and actual output, expressed as a percent of potential output.  The stagnation in the output gap—which is mirrored by stagnation in the share of working-age adults who are employed since the official recovery began—is caused in large part by the steep contraction in budget deficits.

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Earlier this week I wrote a post with a graph showing just how austere public spending has been in the last 5 years relative to historical episodes of recession and recovery. Paul Krugman coincidentally posted a piece making the same point a couple hours later (which just might have given it a bit more reach).1

This was the graph I posted (which is also in a paper I co-authored with Hilary Wething):

Note that the difference between today’s level of public spending and what would have prevailed had just the normal historical experience following recessions held is absolutely enormous. Had we tracked this normal historical experience we would have about $800 billion more public spending and the economy would be essentially back to pre-recession health.*

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Here’s what we read today. Share interesting articles in the comments!

• The Mismeasure of Poverty (New York Times)
• Cashier or Consultant? Entry Labor Market Conditions, Field of Study, and Career Success (Yale University, pdf)
• Washington Post Beats Up on Disabled Workers, Again (CEPR)
• 5 reasons Republicans should support Janet Yellen (CNN Money)
• How Bad Data Warped Everything We Thought We Knew About the Jobs Recovery (The Atlantic)

Last week, Brad DeLong posted what he called his “Seven Cardinal Virtues Of Equitable Growth.” I (pretty much) applaud them all: manage the macroeconomy; boost public and private investment; shift from value-subtracting industries (health care administration, prisons, finance, carbon energy) to value creating sectors; create a carbon tax; more immigration; obtain more equality of opportunity in 50 years by obtaining substantial equality of result right now; a well-functioning economy will need a larger government (addressing health-care finance, pensions, education finance, research and early-stage development) relative to the private economy than the twentieth century did. But, like many of my colleagues on the center-left, Brad overlooks what I see as the key economic challenge of our time—generating broad-based wage growth.

While Brad buries the goal of equitable wage growth in the grander category of “obtaining substantial equality of result right now,” I think economists and policymakers must explicitly focus on generating broad-based wage growth when discussing income inequality. This issue must be front and center, or we will never generate the policies needed to achieve the broadly shared prosperity we all want.

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It is taken as a given that the annual fiscal policy dramas of the past few years (last year it was the “fiscal cliff,” the year before it was running up against the statutory debt ceiling, and this year it’s debt ceiling again plus the need to pass a “continuing resolution” to fund the federal government over the next year) are “bad for the economy.”

The general idea that these fiscal policy fights have hurt the economy’s recovery from the Great Recession is clearly right. However, far too many people get the story wrong about how these annual fiscal dramas have slowed recovery. In short, it’s not that they introduce damaging “uncertainty.” Rather, it’s that they have led to smaller budget deficits, which have sucked purchasing power out of an economy that remains severely demand-constrained.

This may sound doubly strange—the corrosive impact of “uncertainty” is now essentially an official talking point for the Beltway pundit class, and the most treasured cliché of economic commentary is that reducing the budget deficit is nearly always and everywhere a good thing.

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