Oct. 7 (Bloomberg) -- In any negotiation, it is inadvisable to make threats that aren’t credible. Probably the only thing worse is to threaten actions that will end up helping the other side. Yet the Tea Party-affiliated House Republicans aren’t simply making this very mistake with the government shutdown; they are gearing up to do it again, on a grander and more fatal scale, with the debt ceiling.
Much as Arthur Scargill, leader of the U.K.’s National Union of Mineworkers, did in the 1980s, the Tea Party today appears to have a political death wish. Scargill ended up giving Prime Minister Margaret Thatcher exactly what she wanted -- a protracted confrontation in which he came across as an extremist, eroding any popular support for the miners. Scargill got a great deal of national attention, but the miners ended up with very little, if anything. They had some legitimate grievances, but their attempt to force a democratic government into full capitulation didn’t play well.
In the end, the miners were a minority of a minority (unionized workers). Their demands were perceived as extreme and extremely unreasonable. Tea Party Republicans seem determined to head the same way.
The government shutdown has become a farce. Late last week, House Republicans supported a measure that promises full back pay to all government employees once funding is officially restored. President Barack Obama accepted this deal with alacrity (though it hasn’t passed the Senate), so now the government and its services are shut down, without any likely cost savings. This is a strategy of pure pointless irritation and self-inflicted international humiliation. It also worsens the budget deficit.
The Smithsonian’s National Zoo, for example, is one of the world’s leading organizations for the preservation of and education about animals. It is now closed -- though all the animals remain fully cared for -- because “nonessential” personnel aren’t allowed to work. If the shutdown persists through Halloween, the zoo will have to cancel one of its most successful fundraising events, Boo at the Zoo. So the zoo’s expenses remain about the same, but the public can’t see the animals, and the zoo’s efforts to raise money are imperiled. This is stupid economics and idiotic politics.
Naturally, each side blames the other for the shutdown. But just as when Scargill sought to blame Thatcher for provoking a big strike in 1984-85, you can believe whatever you want -- it’s the dynamics of public opinion over time that matter. As long as Scargill’s members remained on strike, the dislocation to the economy grew, and the miners became less sympathetic.
In two months, the Affordable Care Act will be firmly in place, because individuals who need insurance will have signed up through exchanges. Do the Republicans really propose to strip those people of coverage? Even if they are successful in dissuading or otherwise preventing healthy young people from signing up, that tactic will just increase the costs of running the system. In this context, the looming confrontation over the debt ceiling really promises to do in the Tea Party.
Let’s assume the threat is credible, and the Tea Party really would push the U.S. government to renege on its promises, to bondholders or Social Security recipients or other people with contractual payment commitments. There are two possibilities.
One would occur if the Tea Party and House Speaker John Boehner have the ability to force a full default of some kind. The blow to private enterprise would be so colossal it would take us a generation to recover. Anyone who complains about what happened with the expansion of federal government during the New Deal in the 1930s should think some more about this scenario and what it implies about the opportunity to enlarge the mandate of government.
Or, in a second scenario, the House Republicans bring about some form of partial, mixed quasi-default, creating tremendous uncertainty and undermining the important stabilizing role of a well-run federal government in the modern economy. If this continues in on-off fashion for months, the results will be even worse.
It is commonly supposed that Republicans won’t experience public blowback because the House has become so polarized as a result of gerrymandering. But Senate and presidential elections cannot be fixed in this way. Among other things, the strategy of establishing conservative control over the Supreme Court seems likely to go out the window. Moderate Republicans such as Representative Charlie Dent of Pennsylvania have it right: theirs doesn’t look much like the party of responsible government.
Scargill and his tactics still have adherents, but not many. Thatcher won the election that followed the strikes, in 1987, and her Conservative Party stayed in power until 1997. Tony Blair eventually led the Labour Party to victory, but only by embracing many of Thatcher’s ideas. Perhaps the Republicans plan to blame Obama for any negative outcomes. They should check with Scargill on the electoral appeal of that approach.
(Simon Johnson, a professor at the MIT Sloan School of Management as well as a senior fellow at the Peterson Institute for International Economics, is co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”)
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