In an April 2011 speech at the Heritage Foundation, Deputy Defense Secretary Ashton Carter said the stopgap budgeting “has cost us billions,” adding “a dollop of cost overhead to everything we do. It is like a hidden tax.”

Ironic Outcome

“The irony of this is that we’re in this situation because people say they want to reduce government spending; this has the impact of increasing government spending,” Democratic Representative Robert E. Andrews of New Jersey said in an interview. “If you’re operating on a three-month-to-three-month budget, you can’t spend for the long haul. You’re always buying for the short term.”

The persistent uncertainty about tax and regulatory policy, as well as federal spending levels, has hindered economic recovery, according to analysts who have studied it. Steven J. Davis, an economist at the University of Chicago Booth School of Business, built an Economic Policy Uncertainty index to gage the impact. In a Jan. 1 paper, Davis said, based on his index, that the uncertainty foretold the creation of 2.3 million fewer jobs and gross domestic product growth of 2.3 percent less than would have been the case otherwise.

“High levels of uncertainty, including uncertainty associated with fiscal policy and other policy matters, tend to slow investment, economic growth and consumer spending,” Davis said in an interview. “We don’t think it’s too surprising that this has led to lower employment growth, lower investment and lower output.”

Policy Distraction

In a time of emergency legislating, substantive policy making is starved out, making it difficult to see how Obama can make any progress on the major issues on his second-term agenda, including immigration and gun control, that require congressional action.

In addition, the practice has taken its toll on the government’s reputation. In a Gallup poll of 1,011 adults conducted Jan. 7-10, 18 percent of Americans named dissatisfaction with government as their top concern -- the third most commonly cited problem, outpacing unemployment. That level of frustration is the highest recorded by Gallup since the Watergate era of 1974.

“This is a distraction from everything else, and it undermines basic capacity to believe in the system,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and chief economic adviser to 2008 Republican presidential nominee John McCain.

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