Shutdown not the worst news
Buenos Aires Herald, October 8, 2013
A week into the government shutdown, the real bad news is not that the government has officially closed for business. After all, everyone knows the government will eventually reopen. The most disturbing message from Washington is the incapacity of the political leadership in the most powerful country in the world to compromise to prevent these kinds of embarrassing situations.
After Congress failed to pass legislation to keep the government properly functioning, the White House was forced to order a government shutdown. Though many key agencies and services—including the military, the border patrol and social security checks—have continued functioning, millions of federal workers have been furloughed. Because Federal workers are voters too, the House of Representatives rushed a bill to secure payment for those workers when the government reopens. Thus, those workers are not showing up to work, but will still be paid. Yet, people who depend on government services—for things other than pensions and other safety net benefits—have been adversely affected.
The impact of the government shutdown has also been felt in the economy. The Dow Jones has lost 4% in the last weeks—partly in anticipation of the shutdown. Speculation over a possible failure to reach an agreement to raise the debt ceiling by the end of October has also hindered the slow economic recovery. The fact that the political elite had decided to hold the economy hostage over political discrepancies sends the worst kind of signals to the world.
Republicans tend to believe that the government is more part of the problem than part of the solution. President Reagan (1981-1989) famously declared that “the nine most terrifying words in the English language are: I'm from the government and I'm here to help.” Under the Bush (2001-2009) administration, tax cuts and higher defense spending led to a large budget imbalance. When Bush took office, he inherited a balanced budget. Eight years later, he left in the middle of the worst economic crisis in over 7 decades. Government spending was out of control and the deficit increased rapidly as a result of the stimulus package implemented to get the country back on track after the 2008 crisis.
Most Democrats believe the government is part of the solution and often times are enthusiastic about increasing the size and reach of government programs. President Obama’s health care reform reflects both the best and worst of the Democrat’s approach to government. Advocates of Obamacare highlight the social costs of having millions of Americans without health insurance and the actual financial costs for local and state governments—and for the federal government. They claim that having a national health care system makes economic sense—and it also advances social justice. However, the actual long term costs of Obamacare for the federal government are unknown. Though the program seeks to control costs from escalating, past experience shows that the government has a difficult time keeping costs down. Opponents of Obamacare argue that incurring on additional government spending is the worst thing a highly indebted government can do.
The current government shutdown results from Republicans wanting to defund Obamacare and Democrats rejecting the notion that a political minority can impose its will. Moreover, as Obamacare was an essential campaign issue, the fact that Obama won re-election should be sufficient for Republicans to accept defeat. In the view of Democrats, holding the entire government hostage over a battle they already lost is something the Republicans should not be entitled to do.
The impasse, which already led to the government shutdown, will likely extend to the upcoming negotiations to raise the debt ceiling. As the federal government continues to run deficits, negotiations to raise the debt ceiling have become a recurrent political feature during the Obama years. As the debt ceiling will be again reached by the end of October, Congress needs to authorize the president to continue borrowing. House Republicans want to link the authorization to defunding Obamacare—or at least limiting its reach. Obama is betting that the American public pressure to avoid putting the American economy at risk will force Republicans to grant him a debt-ceiling increase. The prevalent mood in Washington—seven days into the government shutdown—remains bleak as leaders of both parties are more interested in blaming each other for the failure to reach a compromise than in negotiating to find a solution.
The United States remains the most powerful country on earth and its economy is the largest in the world. However, since the 2008 crisis—and arguably since Bush’s wars in the Middle East—Washington has lost influence, persuasion power, and respect in the world. The economic crisis has eroded American confidence—and weakened its wallet. However, the inability of American political leadership to put partisanship behind and build a compromise that can help move the country forward is a much bigger problem. Unfortunately, that problem will remain a threat over the future and well-being of America long after the government shutdown ends and federal employees return to work.