Once again, Washington has been engulfed by a Congressional version of the old ‘chicken’ game, one which has caused a partial government shutdown and threatens a default on the national debt.
The only way to win a game of chicken is to keep your hands off the steering wheel. The Tea Party doesn’t want to negotiate and neither does Obama. We’ll see who swerves first later this week. Senate Democratic and Republican leaders are now trying to patch together a deal, but they will still have to sell it to the House, where Republicans appear to be in no mood for concessions.
If U.S. political leaders really want to play this game, better they do it on a deserted highway somewhere — and not with the machinery of government. This standoff is causing unnecessary damage to a still-frail U.S. economy, with serious consequences beyond America. The United States’ international credibility has seldom been this dismal.
The Republicans had the weaker hand here and are seen by many as the main culprits — but there won’t be any winners this time. Everyone agrees that it is a horrible way to run a government but partisan posturing seems to be overwhelming leadership and statesmanship. Saying that the ‘system’ is dysfunctional doesn’t begin to describe this debacle. Political leadership on both sides is an embarrassment — and those responsible all know it.
The Tea Party diehards in the Republican party — the onesCharles Krauthammer mocked as the “kamikaze brigade”— sensed blood in the water over the president’s Affordable Care law (‘Obamacare’) and initially refused to fund it in the House, a tactic that was doomed from the start. Then they demanded (again, unsuccessfully) a year’s delay in the individual mandate in exchange for any agreement to re-open government or to raise the debt ceiling.
The fact that the health plan’s rollout, which began Oct. 1, has been plagued by computer glitches and considerable confusion should have bolstered public skepticism about the plan. Instead, Obamacare’s flaws were lost in the sniping over the Congressional stalemate. If anything, Republican tactics stepped on the advantage this might have given them in their fight against Obamacare. Since some 80 per cent of Republicans in the House are virtually guaranteed re-election and represent strong anti-Obama constituencies, they thought they had nothing to lose.
President Obama and the Democrat-controlled Senate were equally determined not to compromise one iota on Obama’s health care legacy — sensing that doing so would cripple the administration’s capacity to govern during the next three years. Ultimately — and in the face of polls ascribing the lion’s share of the shutdown blame to them — the Republicans blinked and agreed to a six week increase of the debt ceiling in exchange for a fig-leaf demand for negotiations on spending constraints and revenue issues, consensus on which is likely to be as difficult to attain six weeks from now as it is today. So the stalemate persists.
Obama is able to hang tough because he’s not facing re-election. But the risk goes well beyond short-term political considerations; if there is no deal, a U.S. debt default would stain his legacy along with that of the Republicans.
This is actually the 18th government shutdown in Washington since 1976, so there is more than a whiff of cynicism about its impact. Only 17 per cent of government services have been shut down and exceptions have been made almost daily, notably for military death benefits. National monuments and parks, important sources of tourism revenue, have been the most visible casualties of the shutdown. As is often the case, the effects hit the poor the hardest — those dependent on government assistance. Government employees will get their paycheques, including back pay, when the furlough ends — but not those on assistance.
Two Special Forces raids were conducted recently – one successful, the other not so much — but they at least demonstrated that even a cash-strapped and reluctant America still has some capacity to combat terrorists. More troubling was the fact that the president had to cancel his trip to the Asia-Pacific Economic Cooperation forum at a time when many in the region would have preferred to see tangible evidence of the promised ‘Asian pivot’ — a symbolic and temporary absence, perhaps, but one in a region where symbols matter. Instead, China’s President Xi easily captured center stage at the summit and made the most of it. Many leaders at the summit expressed concern about the antics in Washington — not surprising, given that Asia holds almost $6 trillion in U.S. debt.
A momentary saving grace is that interest rates in the U.S. are low. That won’t last forever, though, and when rates inevitably rise, borrowing costs and the national debt — $17 trillion and growing — could spiral out of control unless structural fiscal remedies are put in place. Prolonged uncertainty almost certainly will prompt higher interest rates.
The shutdown confrontation is being fuelled by sharp ideological divisions between and within the parties and a fiercely polarized media. With a Supreme Court decision pending that may expand already loose limits on campaign spending, the atmosphere is not likely to improve any time soon.
Those predicting that the shutdown could prove to be decisive in the 2014 elections should take a deep breath, however. A year is a long time. This is, nevertheless, a sorry image of democracy to present to the world — and not just to the Chinese.
As former Federal Reserve vice chair Alan Blinder observed recently in the Wall Street Journal, “It is hard for a nation that has taken leave of its senses to remain the undisputed leader of the Free World.”