Thursday, October 10, 2013

The Continuation of the Government Shutdown Could be a Reason for Optimism

The current impasse in the US government has become more convoluted with each passing hour. Reports continue to surface about the shocking level of intransigence in the right wing of the Republican party and its willingness to breach the debt ceiling. However, throughout the process, the battle over the debt ceiling and the battle over the government shutdown have been kept separate. The separation of the two situations is very important and it is even a reason for optimism. It is widely agreed that the government shutdown is a troubling situation but it is one that can be survived. "Essential" functions of the government are kept open with only a limited portion of the population bearing a heavy burden during the shutdown. It is also widely agreed that the debt ceiling would be a catastrophic scenario that should be avoided at all costs. The actual fallout from a debt ceiling breach is up for debate but the potential scenarios are not something to be chanced. Each scenario represents a different level of bargaining leverage and political exposure for the GOP. The government shutdown is a bargaining chip that is not difficult for many Republicans (and their voters) to accept. The government shutdown is acceptable because it fits within the party's demand for smaller government and it provides a forum to advocate for greater power at the state level. On the other hand, the debt ceiling is a poor bargaining chip because it impacts the government as a whole and provides no ancillary political benefits. A question has been posed by many and Ross Douthat's tweet is a good example:
The issue is that passing a two week CR right now is not something that Democrats are willing to do. A two week CR only serves as a way to delay the current shutdown. The only option right now is to sign the clean CR that Democrats have been proposing from the start. However, the only way such a clean CR will get passed is if the GOP is willing to go all in on the debt ceiling. An all in move to the debt ceiling would be a signal that the reports about Republicans are true. The removal of the government shutdown as a bargaining chip for the Republicans would signal that they view a breach of the debt ceiling as a real possibility. If Republicans anticipate a resolution to the debt ceiling standoff (which I believe they do), then the only way to avoid a total defeat is to move forward with the government shutdown. The party leadership anticipates that the debt ceiling will be resolved before the government shutdown, and that is a reason for optimism on the debt ceiling front. The continued government shutdown is a sad reality for the United States but it is a positive signal that the macroeconomy is not the hostage in this negotiation.

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