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In the Nation's Interest

Shutdown Status

By Joseph Minarik

First, a lesson about democracy, from the ancient past – back in B.C.  That is, Before Computers, or more precisely, Before the Internet (so although no factoid is Too Good To Check, this one is Impossible To Check).  I have a vivid memory of a wise grey talking head on the old public television “Agronsky and Company” program – someone so smart and seasoned that I highly respected his judgment – who was fresh back from a stint on the 1972 presidential campaign trail.  This wise person held forth at length on what he saw, eventually coming to his grand conclusion, which was something very much like:  “In all of my years of covering election campaigns, I have never seen such enormous crowds, such enthusiastic crowds, such committed crowds.  So I am absolutely certain, beyond any shadow of a doubt, that George McGovern will be the next President of the United States.”

The lesson in democracy, should it be less than obvious, is that there can be a large, enthusiastic, and committed minority.  In fact, with our polarized, ideological, and nearly equally divided population, such impressive minorities are the order of the day.  There is one on every important issue.  So it is no surprise that such a minority is prepared to stand its ground on the focal issue – the Patient Protection and Affordable Care Act, or “Obamacare” – in the current appropriations and government-shutdown scrap.  In fact, the major problem is determining which side is the minority and which side is the plurality – with, of course, a disengaged and loosely engaged undecided group holding the balance of opinion.

And so the federal government is shut down.  The press has taken to calling this a “partial shutdown,” as if to belittle it, because some federal employees are at work.  But you are aware that the law has always held that employees who protect safety and property, or funded by continuing law, have stayed on the job in every shutdown.  In fact, this is the most nearly total shutdown ever, because with not a single appropriations bill enacted, this shutdown touches every agency of government.

The executive branch is conflicted, caught in a “Catch-22.”  On the one hand, it wants the public to understand the adverse consequences of the absence of public services because of the shutdown.  But on the other hand, it is honor-bound to manage the agencies and the funding it has as efficiently as possible, and it would reflect poorly on its own performance and competence if it did not.  How this executive branch will balance its public responsibilities and its political ambitions will be for every citizen to judge.

All of this tells us that the current deadlock could hold for quite some time.  And there is even more reason why the stalemate could persist.  In particular, it can be in the decided interest of all of the combatants to hold out and refuse to reach agreement.  Particularly in the House of Representatives, but to a lesser degree also in the Senate, an increasing number of seats are untouchably in the column of one party or the other.  The nominee of the favored party is safe in the general election.  However, an incumbent office holder might not be safe in his or her own party’s primary election, typically dominated by the most ideologically extreme and committed party members – if the incumbent has compromised or collaborated with the other party, which would be essential to enact a solution to today’s shutdown into law.

Stepping forward from that point:  Right now, we have a standoff between two parties and their deeply held views.  A widely understood principle of negotiation is that reaching a conclusion requires that both sides achieve some objective, if only to satisfy their own constituencies.  Therefore, an exit from this standoff requires that the two sides achieve a sufficient measure of cooperation to find that elusive win-win.

But right now, that win-win is nowhere to be seen.  Because one side’s stated objective is for “Obamacare” to move forward and the other side’s stated objective is to kill it, there is no easily calibrated compromise.  Nor is there any apparent will to try to find one, with the atmosphere and the rhetoric so clearly super-heated.

At least three questions complicate the bargaining, explicit or implicit.  First, each side alleges that the other refuses to negotiate fairly, at least by the accuser’s own definition.  With that assertion having been made, any concession could be seen as a reward for unfair bargaining, or “blackmail” (the term has been used), which merely would encourage more blackmail demands.  Second, there is zero hope of finally settling the appropriations for this fiscal year at this time.  The feasible goal is to achieve only a short-term – for perhaps six weeks – continuing resolution (CR).  The issues would have to be addressed again at least once before the end of the year.  Therefore, any alleged concessions to blackmail would only buy time, and could be rewarded with further blackmail demands just a few weeks down the road.  Would that be a good use of those concessions?  Clearly, this poisoned atmosphere is most unlikely to yield any good without some unforeseen and highly favorable developments.

And third, and perhaps most important, we have not one crisis at hand, but two.  Lurking right behind the appropriations hiatus is a collision with the debt limit.  Neither side wants to pay what it perceives to be blackmail to buy its way out of the first problem, only to find that it faces still further blackmail demands over the second.  And if calibrated in terms of the danger to the country, the price of the second would be far, far higher than that of the first.

So to resolve this crisis – and if we roll the debt limit into today’s shutdown conundrum, we are well and truly in crisis – there will need to be some give on both sides.  For an extreme model, the Kennedy Administration had no admiration for the Soviet position in the Cuban missile crisis, but they left space for Nikita Khrushchev to claim a victory to his own followers so that the dispute could be settled without resorting to war.  Similarly, folklore (at least) has it that then-Vice President Richard M. Nixon had serious misgivings about vote counts in the 1960 presidential election, but after considering that his claims could not be factually resolved without provoking a national crisis of governance, he chose to leave them on the table.  And former Governor Mitt Romney’s presidential campaign staff reportedly doubted the initial election returns last year, but Governor Romney determined that pressing that case would not be in the nation’s interest, and so he conceded.  At some point, it becomes necessary to find a solution that is acceptable to all, rather than in the hope of total victory risking a miscalculation that would be disastrous for all.

All Americans need to recognize that failure to increase the debt limit could be a nearly existential threat to this country.  We don’t want to go anywhere near there.  Approaching the debt limit is not an opportunity or a warning; it is a trap.  True leaders who are capable of solving our nation’s problems do not need such warnings.

Resolving the shutdown will require some creativity.  Although neither side controls all of government, and so there is no pre-determined “just” outcome, both sides will need to feel that their constitutional rights have been respected.  It won’t be easy.

And in the meantime, the economy and the financial markets are in for a rough ride.  The economic impact of a government shutdown starts small, but broadens and deepens.  It is all about perceptions and expectations.  Income flows are interrupted, but not all of the would-be recipients of those income flows are cash- or credit-constrained.  However, as those income flows continue to be interrupted and if people come to believe that the interruptions will continue still further, spending will be reduced, and the reductions of spending will cascade throughout the economy.  This kind of a dispute between reasonable and responsible parties would not have much impact.  Seen any reasonableness and responsibility lately?