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Being 'just scared' an improvement: Goldman exec

Gary D. Cohn
Simon Dawson | Bloomberg | Getty Images
Gary D. Cohn

The September jobs report gave us evidence this week that the U.S. economy was losing steam even before the government shutdown and debt limit crisis.

Now Washington appears to be doing its very best to make things even worse with immigration reform seemingly dead for the year, corporate tax reform not likely to happen and another budget battle set for early next year.

Your DCMI columnist this week sat on stage at Goldman Sachs with the firm's president, Gary Cohn, quizzing him on the state of the U.S. and global economy and what if anything Washington could do to make things better.

Cohn's answer: Remove the constant threat of fiscal crisis and maybe get something done on immigration, taxes or long-term entitlement reform to deal with structural debt. We don't need all those things, Cohn said. Just one or two to bump up investor and CEO confidence.

"We need to go from pure paranoia to just scared. Just scared would be a big improvement," Cohn told me.

(Read more: How long will fiscal crisis drag on the economy?)

As DCMI has written before, the chances of another shutdown and debt limit crisis next year are fairly low given how bad the last fiasco burned Republicans. But the chances are not zero.

And even if we avoid a total crisis, there is only a limited chance that negotiators will be able to do anything but come up with another short-term spending plan that does nothing to change the blunt sequester spending cuts that the Congressional Budget Office says will cut 2013 GDP growth by 1.5 percent.

Even many staunch deficit hawks would rather change the sequester to include more long-term entitlement changes but the GOP's new hardline on budget talks is keeping discretionary spending for 2014 at $967 billion, a number well below what Democrats will agree to. How that gets resolved is unclear to everyone at this point.

And it now appears that immigration reform, which many businesses want to see in order to attract more high-skilled workers from abroad, is dead in the House for this year after passing the Senate. House Republican leaders had planned a piecemeal approach to immigration reform, voting on individual measures rather than the Senate's more sweeping approach.

But now it looks like there may not be a majority for any immigration reforms in the House. And if the issue slips to next year, when the midterm congressional campaigns heat up, it is almost certainly dead until 2015.

The same is probably true of corporate tax reform. Democrats would agree to lower the nominal 35 percent marginal rate but only in return for significant new revenues from loophole closings. But agreeing on what loopholes to close is very difficult and most Republicans view an overall increase in tax revenue a non-starter.

Add to the mix the continuing nightmare of Obamacare implementation, with even many Democrats now calling for a delay in the individual mandate, and you have a picture of a federal government that is only barely functional. And you have an economy that will likely have to spend 2014 once again fighting a big drag from inside the Beltway.

—By Ben White, POLITICO's chief economic correspondent and a CNBC contributor. White also authors the daily tip sheet POLITICO Morning Money [politico.com/morningmoney] Follow him onTwitter @morningmoneyben.

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