Saturday, September 14, 2013

Government Shutdowns, Past and Present

Maybe this is just a tendency to idealize the past, or to make light of past crises because we know the outcome, but I see a definite difference between this threat of government shutdown and the ones under the Clinton Administration.

It is not so much that the Republicans were less crazy last time, as that they were less cynical. Last shutdown was not the attempt at blackmail this one is shaping up to be, but more a misreading of the public mood. What happened (so far as I can tell) is this. Republicans in the 1990’s made the horrifying discovery that the existence of government means that it might fall into the hands of a Democrat. They had assumed that such outrages were a thing of the past, yet there it was, happening. Their traditional hostility to government multiplied many-fold. They went on the campaign stump denouncing government as an evil parasite that drained people’s life blood and gave them nothing in return, a monster of oppression, crushing their liberty underfoot. Republicans pledged to attack this beast, not just with a meat ax, but a chainsaw. People applauded and reacted favorably. Republicans were foolish enough to take them at their word and assume that people really meant it. They assumed that if people hated government that much, they would happily accept any sacrifices necessary to curb the monstrosity and would consider late Social Security checks or closed national parks as a small price to pay for freedom. The American people, by contrast, assumed that if the government was a parasite draining their life blood, or a monster crushing their liberty, then shutting it down would not cause any hardship. Once it became clear that shutting down the government caused inconvenience, people lost a lot of their enthusiasm for shrinking it, let alone shutting it down. Republicans ended up caving, one may assume, because they were sincerely shocked to learn that shutting down the government was unpopular.

This time, by contrast, Republicans have no illusions that shutting down the federal government will be popular, or that people will consider late Social Security checks a small price to pay for freedom. They know very well that a shutdown will not be popular. In fact, they are counting on it. They intend shutdown, quite frankly, as blackmail. You want your Social Security check? You want your Medicare reimbursement? You want air traffic to operate? Then kill Obamacare.  They will not cave because they have no illusion that the American people will like what they are doing; their intent is to hurt the American people and count on the Democrats to have less stomach for inflicting pain.

In some ways, this is a remarkable development.  After all, when the Tea Party first arose, it saw itself as the voice of the American people (or at least, the Authentic Real American people) crying outrage across the political spectrum.  Showing a willingness now to hurt the American people to force your opponents to submit sounds very much like an acknowledgement that the people are not with you on this fight.

And what about the debt ceiling?  Conventional liberal wisdom has it that breaching the debt ceiling would be much worse than a government shutdown.  I am beginning to be not so sure.  Shutdown, of course, means that everything shuts down and nothing gets done.  Debt ceiling means that government funding shrinks by a third.  That would be bad, of course, but Republicans may be counting on it not to be as bad.  In fact, it may be that there they are repeating the same mistake as they made in the 1990's.  After all, Republicans really, really want to cut spending and balance the budget.  Refusing to raise the debt ceiling and forcing the government overnight to make do with a third less would achieve those goals.  It may very well be that a lot of Republicans recognize that a total shutdown would be unpopular, but that cutting funding by a third would not be so bad, and would be popular, at least with their base.  I think they are much mistaken.  I am particularly fond of this post, written in the 2011 debt ceiling crisis by Megan McArdle, warning what the consequences would be of a debt ceiling breach forcing government to cut spending by 40% overnight.  Cutting it by a third overnight would not be quite as bad, but it would be bad enough.

McArdle starts with the assumption that we will preserve interest on the national debt, military pay and pensions, Social Security, Medicare and Medicaid untouched.  This will require us to cut everything to zero.  She emphasizes why that would be intensely traumatic.  But in fact, the Obama Administration maintains that it does not have the constitutional authority to prioritize, and may not even be technically capable of it.  It has also ruled out radical options such as declaring the debt ceiling unconstitutional or de facto ending it by minting platinum coins.  This looks very much like a game of chicken, but it leaves the obvious question of what to do if the other side does not swerve.  So far as I can tell, it leaves Obama with one option only -- pay two-thirds of all bills and send an IOU for the rest.  (If at all possible, make an exception for interest on the national debt).  This may seem to Tea Party Republicans a very satisfactory solution to balancing the budget, one they are willing to tolerate indefinitely, even if it doesn't put an end to Obamacare.  And it still gives them a hostage -- you want your full Social Security check?  Then kill Obamacare!  But it is unlikely to be popular with anyone else, including large portions of the Republican base.  When retirees start getting Social Security checks for only two-thirds of the total; when medical providers get only two-thirds reimbursement for Medicare and Medicaid patients; when contractors get paid only two-thirds of what is due; when public employees, including soldiers, police and prison guards, start getting only two-thirds of their paychecks, and when military retirees get only two-thirds of their retirement; then the pressure is going to start rising on Republicans to raise the debt ceiling and end the squeeze.

Maybe a one-third cut can be tolerated for three times as long as a total shutdown, but over time the pressure will build.  Shutdowns under Clinton lasted from November 14 through 19, 1995 (6 days) and again December 16, 1995 through January 6, 1996 (22 days), or a total of 28 (non-consecutive) days.  If total shutdown could be tolerated for a little under a month, then perhaps cuts of a third could be tolerated for three months.  But that would lead all the way into next year, when people start getting actual insurance under Obamacare, and would force Republicans to push, not just to block people from getting health insurance, but to take away they insurance they had.

I like to think under this sort of pressure, enough Republicans will defect to allow a continuing resolution and increase in the debt ceiling to be passed with mostly Democratic votes.  And if it lead to the overthrow of the current House leadership, so be it.  All I would ask of the House leadership is to kick the can as far down the road as possible.

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