Well, that was expensive. The 16-day partial government shutdown and federal debt-ceiling crisis didn’t crash the stock market. Investors made the assumption that Washington wouldn’t be so stupid as to actually default on government debt.
But the political brinkmanship did likely put a damper on economic expansion. Economists reduced their forecasts for fourth-quarter gross domestic product growth by at least half a percentage point, largely because of the uncertainty Washington created on Main Street.
The hope that some benefit will come out of the latest brinkmanship rests with Sen. Patty Murray, D-Wash., head of the Senate Budget Committee, and Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee. They chair the new budget conference committee created in the deal reached Wednesday to reopen the government and extend the debt ceiling.
So is there any reason to hope that this committee will do anything more than dance along to the next crisis? We’ll offer some reasons to think there might be at least slim hope.
GOP leaders, outside of the Tea Party wing, acknowledge that most of the public has blamed them for the government shutdown and near-default. They should want no part of doing this again in January.
House Speaker John Boehner passed the budget deal in the House with an 87-144 Republican roll call. A majority of Republicans voted against it. Question: If the new conference committee reached a broad deficit-reduction deal that couldn’t win the favor of a majority of House Republicans, would Boehner still move it? With what happened this week, the answer to that question slides a little closer toward yes.
Democrats are falling all over themselves to declare victory. They did score a political victory. But they accomplished nothing this week that helps to put the federal government on a fiscally sustainable path.
So if they’re content with their political victory, where’s the leverage to push them into a real deficit-reduction agreement? It’s in that word they despise, sequestration.
If they sit on their hands, $21 billion in automatic cuts in the growth of discretionary spending go into effect in January. Democrats are squeamish about those cuts. Republicans, for the most part, are not.
The sequester has effectively imposed consequences for the failure of Congress to deal with the entitlement spending growth that has driven federal debt past $16.7 trillion.