Mr. Lefkin, what is the current situation in the US? Why is there a shutdown?
Currently, the House of Representatives is working on passing what is called a “continuing resolution”. This would fund the government through the next fiscal year. This fiscal year ended on September 30th, so it is clearly urgent. However, the bill from the Republican-controlled House included a provision to kill the medical device tax and other key tenets of the Affordable Care Act, the healthcare reform also known as “Obamacare”. But this repeal of healthcare provisions is being met with staunch opposition in the Senate where Democrats have the majority. As a result, legislators have been unable to pass this continuing resolution, and on October 1st, the government began to shut down services.
And what are the implications of a shutdown?
The impact to the US economy will be significant as markets respond both to the fact that US seems ungovernable, citizens lament the temporary loss of services and federal employees and vendors are deprived of salaries and payments. That effect on capital markets will also have repercussions on the rest of the world, as investors grow uncertain about whether the US will be able to pay its bills.
So why aren’t the lawmakers in Washington doing something about it?
Political miscalculation. The actor Will Rogers once said, “When you find yourself in a hole, stop digging,” and it’s a popular rule for politicians. Well, the Republican party is violating that rule. They continue to demand that the president agree to either withdraw spending for his signature healthcare law, or at least agree to its postponement for one year, as a condition of their support for the funding of the federal government. While public attitudes on the health care law are generally not very good, an overwhelming number of people, particularly the politically important independent voters, do not want to do anything to stop it if it means closing of the government.
But aren’t the Democrats at least alarmed at the harm that is being done?
Certainly, but there’s another bit of political wisdom from Napoleon: “Never interfere with an enemy while he’s in the process of destroying himself.” The Democrats may have their faults, but they are following this good piece of advice. They have found a renewed strength in saying no, and during the past week have benefited as Ted Cruz has become the popular face of the Republican party. They understand that both parties will get public blame for the shutdown, but most of it will fall on the Republicans.
And what happens now?
That’s the third rule of politics: have a graceful exit plan. And the Republicans don’t appear to have one, from what I can tell. Ultimately, the Republicans will be forced to relent with some minor face-saving mechanism. This could happen in a number of ways, such as enacting another continuing resolution that might be an extension for a few months or even a few weeks. However, by incurring such a visible and public loss on the Continuing Resolution, they have significantly weakened their hand for the important Debt Ceiling debate that will begin in earnest sometime later in October.
American politics is always very colorful, but this does seem to be unusual ...
I can speak from the perspective of 35 years of experience. There is always a lot of fighting in Congress, but I never expected the political suicide that I have seen the last few weeks.
