Two weeks, I wrote the following draft. [Where indicated.] As we get to the last day prior to the default, a last-minute intervention demanded by Wall Street looks shakier. Today’s (10/16) NY Times has an article about the logistical difficulties of legislation getting through the Senate and House by midnight today, quite apart from problems related to stalled negotiations. We, the American taxpayers, have already paid a price for this nonsense, because short-term US bond interest rates have risen sharply. The August 2011 fiasco cost all of us tens of billions of $s, all in the name of deficit reduction. This farce will do the same, quite apart from its other economic effects. The Republicans talk about putting people back to work and growing the economy, but professional economists, of all political persuasions, agree that the government shutdown reduces our annual GDP by 0.1% a week. That means we have already lost 0.3% of this year’s economic growth. The range of predictions of 2013 GDP runs from 1.6% (Fitch) for the year, to an annual rate of 2.5% for the fourth quarter (Goldman-Sachs). 0.3%, if we use Fitch’s estimate, is already a 20% reduction in US economic growth for all of 2013.
I have stated repeatedly in recent years that our political system is broken and our economic system, Liberal Capitalism, has died. Congress is debating burial v. cremation.
Oct 5th posting starts here:
President Obama needs to stand up to Tea Party terrorism, both financial and Constitutional. The Republicans threaten to destroy the US Government’s credit rating. Some Republicans seem to be so stupid – and, at this point, they cannot plead ignorance, only stupidity – that they cannot understand the larger financial impact of such a step. As Rep. Peter King (R-NY) pointed out last week, they also seek to undermine the US Constitution and our lawmaking process. Want to abolish Obamacare, as King does: fine, pass a bill, signed by a President.
The House merrily and blithely decided to shut down the government. Ok, Executive Branch, shut it down. The President has already announced the military will stay on duty, so they can enforce the ugly stuff. The FAA should furlough all air traffic controllers and shut all airports. Those of you who plan to fly soon should know that the 3,000 FAA safety inspectors are, in fact, furloughed.
Close the ports, too. The Department of the Interior should cut off access to all Federal land, including access for companies now operating legally there. No Federal inspectors, so no more fracking. Food and drug inspectors are off limits; they are paid by fees, not by Congressional allocation. Agricultural inspectors apparently are not off limits; the Agricultural Dept has laid off 84% of its workforce.
Factories subject to Federal inspection are closing. UT’s Sikorsky Helicopter lays off 2,000 workers as of Monday, and 2,000 more will be laid off this coming week at Pratt&Whitney. And talk about collateral damage, military base grocery stores are closed, so military personnel now have to pay full price for food (about a 30% increase for them).
Want to make the Republicans feel the pain? Tighten the screws; spread the pain. Remove Federal agents from our borders with Mexico and Canada: let local police handle border crossings [sorry, Sen Cruz, no Federal funds to help defray the cost]. Gradually cut off payments, starting with the largest recipients, saving small-scale individual payments, like food stamps, to the last. Cancel Federal contracts, because the government cannot be sure it will be able to honor them. That gives the President wide authority to dump useless military procurements. And all those special pork barrel projects Members of Congress fund for their districts? Flush ‘em. Start with the districts of you-know-who.
Lay off the million people working for the bloated “security” wing of the government. Start with the ones who have been reading e-mail traffic for the NSA.
As I discussed with some friends two weeks ago, Wall St will surely intervene with their Republican lackeys to make sure the US does not default on its debt on Oct 17th, so that Republican threat is as empty as it is stupid. Boehner reportedly said as much in a private Republican meeting on Thursday last. Now, press reports are circulating about behind-the-scenes work for later negotiations.
Obama’s position should be clear: no negotiation over the CR on the budget or the debt ceiling; no nullification (of Obamacare or anything else). Those items, particularly nullification, are not open for negotiation. That issue out of the way, he should certainly welcome negotiation on matters open to negotiation: tax reform; adjustments of the sequester cuts; reforms to mandated Federal spending (like SS or Medicare); a more logical way to determine tax rates (say, by getting away from fixed $ amounts and going to percentages).
As for really painful government shutdowns, they are essential. Quite apart from the needless suffering of Sikorsky workers (et alia), who surely will not get back pay for the lost days, other elements of society are suffering, too. As an historian, I’m not touching any Federal grants, but many scientists rely on that money. What happens to an experiment when the staff required to carry it out (say the person feeding the animals) get laid off? Months, even years of research can be flushed down the toilet. Current grant proposal projects have to be terminated (as the President of my university told all members of our community in an e-mail last week). Students whose loans have not been processed may have to drop out of school (ours, we were assured, had all been processed, but second-semester tuition is due in December). Members of Congress don’t much think about the fact that their mindless brinksmanship has profound consequences well outside their realm of experience.
The political elite, on BOTH sides, pooh-pooh this suffering and the side effects.
As for the pain, start with Texas. Lay off their border patrol staff first: let them supervise it, and pay for it. Looking to the future, let’s use this opportunity to close redundant military bases. Texas has more than ten military air bases (AF and Navy): as a taxpayer, I say let’s get rid of half of them, and scale back. Get rid of Fort Hood, with its roughly 50,000 personnel. We really don’t need to spend as much money on military expenses as the entire rest of the World combined, do we? How about capping US military spending to a percentage of World military spending equal to our percentage of the World’s GDP? (We would be down to about 20%, instead of over 45%.) Phase it in, but start the cuts in Texas and all those places that keep telling us how they don’t need the Federal government. Ok, take them at their word. Think of it this way: Arizona has more active duty military personnel than New York; Texas has 5x as many as New York. Alaska has over 50,000 military personnel and their families: that’s about 7% of the total population. In NY, it’s 0.001% of the population.
Note added Oct 16th: some of these services have, in fact, stopped. Today’s NY Times reports that the Coast Guard has stopped giving ship certificates. Inspectors have been laid off – the salmonella outbreak led to rehiring some of them on an emergency basis. In a default, payments for a wide range of purposes will stop.