The Price of Extremism

© Josh Sager – October 2013

On October 16th, the 2013 government shutdown and debt ceiling fight were resolved with the passage of a virtually clean continuing resolution (a short-term budget that funds the government) and debt ceiling increase—this resolution occurred mere hours before the USA was forced into default, thus narrowly averting a terrible and self-inflicted wound to our economy.

The Republican Party precipitated these crises for the purpose of extorting concessions from the Democratic Senate and President Obama. Initially, the GOP’s demands were focused upon the defunding of ObamaCare, but this rapidly changed once it became apparent that they would not be getting that concession. Over the 16-day shutdown, the GOP’s demands shifted dramatically, as different Republican factions tried to turn the shutdown/incoming debt crisis to advance their personal policy goals.

Probably the best accounting of the GOP demands came from Rachel Maddow in the following graphic:

o-RACHEL-MADDOW-570

The resolution of the debt ceiling and shutdown crises gave the Republicans absolutely none of their demands, making these crises an abject failure as a tactic. In fact, it appears that the GOP achieved only two things from their hostage-taking tactics:

  1. The GOP’s shutdown took over the media cycle and distracted the public from the glitch-ridden and virtually non-functional rollout of the ObamaCare exchanges.
  2. The GOP has suffered a massive drop in their public approval rating—in some polls, the GOP has a disapproval rating as high as 74%.

The crisis-ending bill was essentially clean and had only a few additional provisions—these extraneous provisions include a little pork, a mandate for a budget conference committee (which the Democrats have been demanding for months) and an income verification mandate for ObamaCare subsidies (that was already in the bill).

In short, the debt ceiling and shutdown crises were partisan self-immolations by the GOP which achieved nothing positive for them or the American people.

The Consequences of Brinksmanship

Given the absolute failure of the GOP’s hostage-taking, passage of a bill which gives back pay to furloughed workers and successful aversion of a default, many Americans may think that these crises were concluded before they could cause any damage. Unfortunately, these people would be entirely incorrect, as the mere existence of these crises had several deleterious effects on our economy and our country’s reputation.

While these crises could have caused far more damage than they did (a debt default alone was described by Warren Buffett as an economic nuclear event), governance by brinksmanship has done some very real damage to our country.

Lost Money: During the shutdown, the US government stopped paying many of its workers and was forced to stop some loans and contracts. This decrease in economic activity by the government led to money being withdrawn from the private sector and a decrease in economic activity. According to estimates by financial analysts, the 2013 government shutdown resulted in approximately $24 billion being lost due to this market contraction.

burning-money

Lost Respect: The mere fact that the United States is having serious conversations about whether or not we will pay our debts is massively damaging to our international stature, even if there is no default. Several countries—including China (a major stakeholder in our treasury) and England (a major ally)—have expressed worry about the US’s political problems causing ripples in world market and have floated the idea of “de-Americanizing” the world economy. In addition to losing the respect of nations, the USA also shook our stature in the minds of investors and rating agencies—investors dumped short-term investments in US treasury bonds, while rating agencies are currently discussing changes to the US’s credit rating.

TBillsDebtCeiling3

***Notice the spike in interest rates (insecurity) surrounding the debt ceiling fight and shutdown***

Lost Growth: According to economic analysts’ estimates, the United States lost .6% growth in gross domestic product during the 4th economic quarter from the shutdown/debt ceiling crises alone. While such a drop may not seem high, it is actually incredibly significant in such a large economy (on average, the USA only experiences 3.2% GDP growth per year, meaning that this crisis cut our yearly GDP growth by nearly 20%). The loss of growth due to the shutdown and debt ceiling crises are only the tip of the iceberg, as we have had several such crises every year since right wing extremists were given control over the House in 2010—the effects of these crises add up and result in the pointless loss of economic growth.

10112013_crisis_driven_report_chart-5

Lost Jobs: According to macroeconomic policy advisors from PGPF (a center-right think tank), political brinksmanship and infighting has cost the United States 2 million jobs since 2010. These jobs are sorely needed to aid the recovery, but the toxic and uncertain climate of Washington has prevented them from being created—after all, businesses are no longer certain that the government will even be open for more than a few months in advance, and are facing the constant threat of a debt default if a few extremist Tea Party senators with no grasp on economic decide to have a tantrum.

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Conclusion

In totality, we are faced with the conclusion that, while things could be worse, our politics have started poisoning our economy in a significant way. Foolish and partisan brinksmanship by an extreme and intransigent right wing minority have created economic havoc, even though they have no real power to pass policy. This havoc was aided and abetted by a Republican Party which is unable or unwilling to control its lunatics and a Democratic Party which has been afraid to stand firm against these extremists.

To stop this unnecessary damage to our economy, everybody must do their part:

  • Voters must kick the extremists and political arsonists out of office.
  • Republicans must moderate and come to terms with the fact that their recent electoral losses translate to decreased power as a party.
  • Democrats must stop giving concessions to hostage-takers.
  • The media must start covering these crises objectively (IE. fact-checking and not calling everything even) and calling out extremists wherever they are found in Washington.

2 thoughts on “The Price of Extremism

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