Why the GOP Aims to Sink the Economy

“Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself.”

~ Mark Twain ~

If our economy was the RMS Titanic, Republicans would be like an ambitious first mate, so eager to seize power from the captain that he steers the ship of state into an iceberg, thinking he'll take over when the captain goes down with the ship. Republicans have forgotten — or no longer care — they're on the boat too, and they're working very hard to ensure that the country will be nearly ungovernable should they succeed in seizing the reins of government.

If it seems like the White House is arranging deck chairs on the Titanic, the GOP is busy measuring the the captain's quarters for drapes, even as the ocean pours in. And the tea party orchestra plays on, with just one song on the playlist — “Under the Sea.”

You can take your pick for the moment the GOP noticably went off the rails. I have two favorites: when it fell to Peggy Noonan to be the Republicans' voice of reason following Sarah Palin's VP nomination, and when David Brooks warned the GOP that it “may no longer be a normal party”. Together, they're the political equivalent of Courtney Love showing up at your intervention and Charlie Sheen offering you a ride to rehab. But this Republican party isn't likely to heed such sane voices as Noonan and Brooks, and would just as soon throw them overboard.

The defining moment, as Carl Pope points out, is one that shows how disturbingly deep the GOP's current brand of crazy (that Noonan, Books and others are just noticing) runs, and how far back it goes.

Paul Krugman last week argued that commentators who are suddenly lamenting the “insanity” of the Republican Party are culpable, because they didn't call the craziness out when it began to surface. He's right, in the sense that the American Right began to unmoor itself from reality long before the Tea Party, or even Barack Obama's nomination. One of the lamentably ignored alarm bells came with an “undisclosed” Bush administration official who dismissed his opponents in 2002 on the grounds they were “reality based.”

By that he meant “people who believe solutions emerge from study of discernible reality.” The aide went on that “that's not the way the world works anymore. We're an empire, and when we act, we create our own reality.”

While these comments generated a certain amount of mockery in the blogosphere, most political, economic, and media leaders shrugged it off. The obvious resonance with Fascist theories — that “will” creates truth, rather than truth being an external reality to be determined — alarmed far too few.

While GOP confidence in the ability of imperial “will” to reshape the politics and cultures of Iraq and Afghanistan has dimmed over the past nine years, the scope of their ambition has merely grown. Most recently the Right appears to believe that its desires can reshape the global bond markets, so that a U.S. default would become simply “short term volatility.”

There have been other moments, and debt deal debacle has spawned some real jaw-droppers — like Sen. John McCain, fresh from blaming Arizona's forest fires on illegal immigrants — calling the GOP's game of chicken on the debt limit “foolish” and “bizarre.” One that was brought to my attention this morning, was former Club For Growth vice president, Sen. Pete Toomey's interview with CNN's Ali Velshi.

OK. Let's just stop right there, shall we? Notice that there is no hesitation on Toomey's part when Velshi asks whether it would be worth it to close a few corporate tax loopholes to avoid default and the immediate cessation of about 40% of government spending. He says, “No,” without even pausing to think about it. If the GOP's and the tea party's corporate funders can't keep their tax loopholes wide open, there's no deal.

Just to prove he's a reasonable man, Toomey proposed a partial shutdown that would keep Social Security checks and military paychecks flowing while everything else gets zeroed out. (I'm guessing this is the Michelle Bachmann legislation, which basically empowers the federal government to squeeze blood from turnips.) But it's not until you look at a list of what Toomey and the rest of his caucus are would rather see come to pass that you get a look at how deep this goes. Kevin Drum posted just such a list (borrowed from Megan McArdle) at Mother Jones.

Click to view larger.

  • You just cut the IRS and all the accountants at Treasury, which means that the actual revenue you have to spend is $0.
  • The nation's nuclear arsenal is no longer being watched or maintained
  • The doors of federal prisons have been thrown open, because none of the guards will work without being paid, and the vendors will not deliver food, medical supplies, electricity, etc.
  • The border control stations are entirely unmanned, so anyone who can buy a plane ticket, or stroll across the Mexican border, is entering the country. All the illegal immigrants currently in detention are released, since we don't have the money to put them on a plane, and we cannot actually simply leave them in a cell without electricity, sanitation, or food to see what happens.
  • All of our troops stationed abroad quickly run out of electricity or fuel. Many of them are sitting in a desert with billions worth of equipment, and no way to get themselves or their equipment back to the US.
  • Our embassies are no longer operating, which will make things difficult for foreign travellers
  • No federal emergency assistance, or help fighting things like wildfires or floods. Sorry, tornado people! Sorry, wildfire victims! Try to live in the northeast next time!
  • Housing projects shut down, and Section 8 vouchers are not paid. Families hit the streets.
  • The money your local school district was expecting at the October 1 commencement of the 2012 fiscal year does not materialize, making it unclear who's going to be teaching your kids without a special property tax assessment.
  • The market for guaranteed student loans plunges into chaos. Hope your kid wasn't going to college this year!
  • The mortgage market evaporates. Hope you didn't need to buy or sell a house!
  • The FDIC and the PBGC suddenly don't have a government backstop for their funds, which has all sorts of interesting implications for your bank account.
  • The TSA shuts down. Yay! But don't worry about terrorist attacks, you TSA-lovers, because air traffic control shut down too. Hope you don't have a vacation planned in August, much less any work travel.
  • Unemployment money is no longer going to the states, which means that pretty soon, it won't be going to the unemployed people.

Kind of makes “Cut, Cap and Balance” look like a walk in the park doesn't it? Yet, this is what the GOP is willing to do to the American economy and the American people in order to get its way. In fact, it's just a taste. It's a sampling of what Americans are going to get if the tea party doesn't get what it wants when it wants it. And even a “Jane Galt”-ish type like McArdle doesn't find it appealing

These are just the very immediate, very theatrical outcomes. Obviously, over any longer term, you'd have issues from bankrupt vendors stopping work funded with federal highway money, forgone maintenance on things like levees and government buildings, and so forth. Averting any of these things would require at least small cuts in Social Security, Medicare/Medicaid spending, or military payrolls.

Now, maybe you look forward to these outcomes. There are certainly some on this list that I would be okay with. But because I am not delusional, and I did not fall off of a turnip truck last night, I recognize that the American public does not agree with me, and that if any of these things happen, they will freak out and besiege their local representatives.

McArdle's certainly right about the American public not agreeing with her. The ground of public opinion on the debt ceiling has shifted away from congressional Republicans. Republican and independent voters want a debt ceiling compromise. Eight in ten Americans believe default would do serious harm to the economy. Sixty-two percent of Americans want a balanced approach to the deficit — consisting of both spending cuts and tax increases. That includes 54% of Republicans.

Of course, no one really knows what will happen. There are any number of different ways it could all come crashing down. Even if the Treasury needs to issue bonds to keep getting checks out to senior, creditors, federal employees (what's left of them, anyway), etc. But it's going to have to skip out on 40% to 45% of the rest of its bills, and there's just no precedent for the chaos that could ensue. If government stops spending at the same time that consumer spending appears down for the count, we're looking at an economy like we haven't seen since Hoover. The right's beloved “private sector” might be part of the collateral damage.

The Republicans are right about one thing: A default would cause government spending to contract in real terms. But which would fall more, government spending or the size of the private sector? The answer is almost certainly the private sector, given its dependence on credit to purchase inputs. How much could it fall? Take the contraction that followed the near-collapse of the financial system in 2008 and multiply it by 10.

The government, on the other hand, has access to the Fed, and could therefore get its hands on cash to pay wages. With the debt ceiling unchanged, this would require some legal sleight of hand. But the alternative would clearly be a collapse of U.S. national security—soldiers and border guards have to be paid, the transportation system must operate, and so on. Issuing money in this situation would almost certainly be inflationary, but the Fed might conclude otherwise, because the United States has never been in this situation before, credit is now imploding, and the desperate credit-expansion measures implemented in 2008 proved not to be as bad as the critics feared.

So this is what a U.S. debt default would look like. The private sector would collapse. Unemployment would quickly surpass 20 percent. The government would shrink, but it would remain the employer of last resort.

Even though the debt deal proposals currently on the table call for trillions in painful cuts to programs for the poor, working- and middle-classes, the damage they would do to important programs in education, transportation, infrastructure and health care pale in comparison to what even a “partial default” or “selective default” would do to those millions of Americans, and the consumer economy itself.

Maybe that's why Wall Street is nervous about a short term deal that would mean another round of economic Russian Roulette, and the Chamber of Commerce is pressing for a debt ceiling increase.

Ah, and that's the difference between McArdle and today's conservatives. She's not delusional enough to believe the majority of Americans agree with her that even some of the above might be acceptable. Congressional Republicans are either: (a) delusional enough to think that a majority of Americans agrees with them, or (b) just too far gone to give a damn.

Before you hazard a guess as to which is the case, listen to Sen. Mike Lee articulate the GOPs basic demand: Give us what we want, or we blow the damn thing up.

In an interview on MSNBC’s Hardball Monday evening, tenther Sen. Mike Lee (R-UT) admitted that he is using the threat of a catastrophic default to extort the nation into rewriting the Constitution to force a permanent era of conservative governance:

CHRIS MATTHEWS: How many days do you think we have, on the outside, to get this debt ceiling through before we have a problem? How many days?

LEE: I don’t know, maybe ten days.

MATTHEWS: Okay, in ten days you want to change the United States Constitution by two-thirds vote in both houses? That’s what you’re demanding.

LEE: Yes. If possible we can’t change the Constitution just in Congress but we can submit it to the states. Let the states fight it out.

MATTHEWS: And you think you’re being reasonable by saying you want a two-thirds vote in the House, which is Republican, and in the Senate which is Democrat. You want the Democratic Senate, by a two-thirds vote, to pass a constitutional amendment or you want the house to come down?

LEE: Yes. That’s exactly what I’m saying and I’ve been saying this for six months.

It may be that “blowing the damn thing up” and sinking the ship is what they really want, if that's what has to be, as Eric Cantor put it, “if we want America to be what we want America to be.” As Carl Pope points out, maybe that their ultimate goal.

…Most Americans, regardless of their politics, do not really have enough information to evaluate either the impacts of failing to raise the debt ceiling or failing to take action on carbon pollution. Almost all of us end up being primed by leaders whom we have decided to trust. It is a weakness of the populist Right that science (party for religious reasons) is in disrepute as a reliable guidepost. But that doesn't mean that the average member of the Tea Party is in love with Exxon-Mobil — they're not.

But the Grover Norquists and the Newt Gingrichs and the Charlie Kochs and the Eric Cantors — they all probably have a pretty good sense of what economics and science tell us will happen if we take their advice. They think it is good for the world, even though they understand that the world will become a less safe place. Those who will suffer are, quite simply, not worth worrying about. Risk is good. Failure and suffering are appropriate. Only the tough deserve to thrive.

Welcome to the latest version of the politics of spite and mendacity, in which the Republican party would rather bring the U.S. economy to a crashing halt than risk giving president Obama a “win,” and will threaten to tip America into default and force a global depression in a last ditch effort to lock in policy changes they admit they've failed to accomplish through persuasion and the political process.

It is one of the anomalies of today’s politics: The party that professes absolute fealty to the Constitution in its original form is also the most eager to change it. Exhibit A is the amendment pushed by Republicans to require a balanced budget every year, cap federal spending at 18 percent of gross domestic product, and bar any increase in taxes without a supermajority of two-thirds of Congress or any increase in the national debt without a supermajority of three-fifths.

The immediate explanation for the amendment may seem obvious. Republicans in Congress want to please their party’s base. But why is the base so interested in putting government in a straitjacket? A party that sees itself as likely to win future elections is generally not interested in limiting its own powers. But according to Ran Hirschl, a legal scholar in the field of comparative law, parties expecting their fortunes to decline often attempt to entrench their views in constitutional provisions while they have the power to do so. Hirschl calls this pattern “hegemonic preservation,” and the Republican Party’s eagerness to amend the Constitution is a perfect example.

Republicans know in their gut that theirs is a demographically declining party. The GOP does poorly among younger voters, and it has little appeal to ethnic minorities who represent a rising share of the population. The native-born whites at the party’s base worry that they are losing control of American society, and they see themselves as the source of the nation’s wealth and values, besieged by claimants on the public treasury who steal their money through taxes. Locking in low taxes through the Constitution would offer them protection even after they can no longer dominate elections.

Maybe the Republicans' “Titanic Politics” isn't about steering the ship of state into an economic iceberg, in hopes of taking over when the captain goes down with the ship. Maybe it's not that they've forgotten their on the boat, too. Maybe they know they're never really going to take the helm any other way, and are willing to send it to ocean floor if they don't. Either way, they'll go down with the ship too, and take the rest of us with them.