Thursday, October 17, 2013

A solid majority of House Republicans just voted to crash the US economy and the world financial system

At the very last moment, the Republicans caved in and allowed their latest manufactured current crisis to be brought to an end. The scenario predicted by analysts like Noam Scheiber turned out to be correct. Facing what was starting to look like a public-relations debacle for the Republican Party, which might do significant electoral damage, the Senate Republicans would work out a deal with the Senate Democrats—amounting essentially to what House Speaker John Boehner had described as "unconditional surrender" by the Republicans—which the full Senate would quickly pass. At that point, Scheiber predicted on Sunday, Boehner would be forced to bring the Senate deal to the House floor for a vote, despite major opposition and anger from within the House Republican caucus.
There is simply no House Republican leader who can resist a bill that many if not most Republicans want to see pass, a bill that has passed the Senate, and to which the only alternative is the complete annihilation of both the Republican Party and the global economy.
That part of Scheiber's analysis also turned out to be correct. The House then passed the deal, the partial government shutdown is over, the debt ceiling was not breached, and economic disaster has been averted ... for the moment.

Before we start to feel too relieved, however, it's important not to ignore some troubling aspects of the situation.

=>  First, this is a reprieve, not a solution. The US government is funded only through January 15, and the debt ceiling has been suspended only through February 7. There is a good chance that the Congressional Republicans will put us through another debt-ceiling crisis within the next few months, and will continue generating more crises indefinitely. This has become part of their normal modus operandi. To borrow one of my favorite phrases from the movie "Performance", expecting them not to do it again is like telling a mad dog not to bite.

=>  Second, even though the most catastrophic outcome was averted in this case, the Republican strategy of government-by-crisis-and-extortion has nevertheless done significant and accumulating damage to the US economy, to the effectiveness and legitimacy of our political system, and to America's position in the world—and will continue to do so. A report in today's New York Times spelled out some of this damage:
Even with the shutdown of the United States government and the threat of a default coming to an end, the cost of Congress’s gridlock has already run well into the billions, economists estimate. And the total will continue to grow even after the shutdown ends, partly because of uncertainty about whether lawmakers might reach another deadlock early next year.

A complete accounting will take months once the government reopens and the Treasury resumes adding to the country’s debt. But economists said that the intransigence of House Republicans would take a bite out of fourth-quarter growth, which will affect employment, business earnings and borrowing costs. The ripple from Washington will be felt around the globe.

“We saw huge effects during the summer of 2011, with consumer confidence hitting a 31-year low in August and third-quarter G.D.P. growing just 1.4 percent,” said Beth Ann Bovino, chief United States economist at Standard & Poor’s, referring to earlier brinkmanship over the debt ceiling. “Given that this round of debt ceiling negotiations” took place during a shutdown, she said, “the impact on the economy could be even more severe.” [....]

Moreover, this latest budget impasse came after years of similar episodes, and the economic ramifications have accumulated over time, analysts say. A new report from Macroeconomic Advisers, prepared for the Peter G. Peterson Foundation, estimates the costs of the fiscal uncertainty of the last few years. Its model suggests that uncertainty since late 2009 has increased certain corporate borrowing costs by 0.38 percentage point; lowered economic growth over that period by 0.3 percent a year, costing at least $150 billion in lost output; and left this year’s unemployment rate higher by 0.6 percentage point. That translates to 900,000 jobs lost.

The unusually rapid pace of deficit reduction, concentrated on goods and services the government delivers, has had a further damping effect on growth, swamping the cost of the relatively brief shutdown, economists said. Macroeconomic Advisers estimated the impact at about 0.7 percentage points of G.D.P. a year, equivalent to over $300 billion in lost output over the last three years. Additional cuts would slow the economy even more, economists say. [....]

The 16-day shutdown itself has already led to the biggest plunge in consumer confidence since the collapse of Lehman Brothers in 2008. [....] The gridlock also had ripple effects on many industries that rely on the federal government in one way or another. Import inspections, export financing and the issuance of oil and gas permits all slowed.  [Etc. ....]
=>  And third, even though the House of Representatives did pass the deal ending this crisis, it is important to notice that a solid majority of House Republicans voted against it. The measure passed 285-144, with the votes in favor cast by 198 Democrats plus 87 Republicans. All the negative votes were Republican. This means that among the 232 Republican Representatives in the House, 144 voted to kill the deal versus only 87 who voted in favor of accepting it (with one abstention). (For a detailed picture, see here.) Even at the bitter end, on the last possible day to defuse the crisis before the debt ceiling was breached, over 60% of House Republicans voted to push the US government into default, with incalculable but almost certainly catastrophic consequences. This is a very important point, with very ominous implications, that shouldn't be forgotten or obscured.

=> Is it unfair, one-sided, or exaggerated to suggest that the national Republican Party has become a dangerous menace to the republic, with no clearly visible redeeming features? I don't think so.

—Jeff Weintraub