First they threatened to shut down the U.S. federal government. But President Barack Obama refused to abandon his signature health care reform law, so congressional Republicans refused him a budget. Washington went dark and Americans turned against them, but still they demanded and still he denied. Now they threaten to force the country to default on payments they themselves authorized, with disastrous potential for the world at large. Enough is enough.
In its second week with no end in sight, the first federal government shutdown in 17 years has served only to disgrace and embarrass the United States. Republicans' stated goal — repeal or delay of the Affordable Care Act — appears as unlikely as it did two weeks ago. The president's reform law took effect the day the shutdown began, but the country has not yet collapsed amid fire and brimstone.
That shouldn't surprise anyone. Despite Republican claims to the contrary, the Affordable Care Act has had little direct effect on U.S. health care since its enactment in 2010. Many of its regulatory provisions (for example, state affordable health care exchange systems) are only now coming online, while many others (including the individual mandate) remain a year away. Of course, Republicans have tried and failed to derail the law for years. Why the sudden at-all-costs effort to destroy it before October 1, 2013?
Remember, many of its major provisions only took effect last week. Conservatives have claimed for years that Obamacare would ravage the American economy and job market, but what if it didn't? What if it expanded coverage and lowered costs exactly as the president claimed it would in 2010? Americans would likely reward Democrats in the crucial 2014 midterm and 2016 presidential elections, the GOP's worst nightmare. Republican officials thus believe it critical that they prevent voters from ever living in an Obamacare America.
They failed, of course. The great irony in this shutdown is that ACA-related activities enjoy funding, unfazed by the events in Washington. If Republicans were going to stop Americans from actually living under Obamacare, a government shutdown was never going to do it. Some had hoped the mere threat could force the issue, but they clearly underestimated Democratic commitment to the law's implementation.
So where does that leave Republicans? Back where they started with nothing gained but the scorn of the American public. Denied their only stated goal, this disgraceful shutdown only continues because conservatives feel they are "owed" something for all their theatrics. As one GOP congressman put it last week, "We are not going to be disrespected. We have to get something out of this. And I don't even know what that is." Yes, that's an exact quote.
Republican Speaker of the House John Boehner angrily declared that the shutdown wasn't "some damn game," but actions speak louder than words. He and his party hijacked American democracy for political gain, refusing to reopen the government until the president gives in to their demands. Now they have added another layer of absurdity, threatening not to raise the nation's debt ceiling unless Democrats agree to their terms. Before we explore why this is absolutely insane, it's important to understand just what the "debt ceiling" really is.
When the U.S. Congress authorizes spending which exceeds available revenue, the Treasury Department must obtain additional funding through the sale of government bonds. Think of these bonds as an IOU from the U.S. government to whoever purchases them — and contrary to popular belief, the vast majority are purchased and held by American interests. Individual countries hold relatively small amounts of U.S. debt, with China at 8%.
Should Congress repeatedly authorize spending which it cannot afford (and it does), Treasury will eventually hit its legal borrowing limit, which is set by just who you'd expect: Congress. This creates a juicy political cycle whereby Congress can order the president to spend large sums of money it knows Treasury cannot afford without raising the debt limit, then react in shock and horror when Treasury announces the bad news several months later. The limit can then be used as leverage against a "fiscally irresponsible" president.
Other countries realize the ridiculousness of this arrangement and bundle in the authority to borrow sufficient funds whenever they authorize new government spending. But American politicians enjoy political gamesmanship (see fiscal cliff, sequestration, filibuster, shutdown, etc.), and so the debt ceiling remains in place. It has been raised more than 40 times since the Reagan administration, when it was raised a record 18 times. Under President Obama? Three.
Whatever your opinion on debt, deficits, and federal spending, this latest demand is equally abhorrent and far more dangerous. A (short) government shutdown is a serious but ultimately reversible matter of domestic concern. Defaulting on America's foreign debt is another matter entirely. Economists, Wall Street financiers, and myriad heads of state have called on Republicans to abandon their scheme and simply raise the debt ceiling, with good reason.
The United States is the engine of the global economy, and government debt is its fuel. The U.S. purchases foreign debt, Americans and foreigners purchase U.S. debt, and everyone pays regular interest to one another. It's a complicated system, but the interest payments are what matters. If Treasury fails to make those payments — its cash reserves run dry October 17 — those vital bond sales cease, leaving America unable to pay its creditors.
Made worthless by default, no one would purchase the Treasury bonds needed to finance the U.S. government. Denied sufficient funding, Congress would need to immediately slash tens of billions in spending, halting domestic investment and pushing the country back into severe recession. The global economy would quickly follow. And this time, the U.S. would lack the financial means to combat the downturn with economic stimulus. The resulting crash could even eclipse the Great Depression.
This is the consensus echoed by the World Bank, the International Monetary Fund (IMF), and countless others. Their certainty hasn't stopped some conservatives from insisting that default would be "no big deal." The CEO of Goldman Sachs says otherwise, warning that "there's no debating the seriousness of the U.S. not paying its debt."
That Republicans would even threaten such calamity has outraged the world. That they appear willing to follow through speaks volumes. John Boehner should resign in disgrace for allowing such madness into the U.S. House of Representatives, but he won't. His party should apologize for its actions, but it won't. It's all "some damn game" to them, one they don't understand and one they cannot be allowed to "win."