StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Here's Why Republican Talk About Default And Shutdown Is Not An Empty Threat

14 Jan 2013
Posted by Stan Collender

Politico had an outstanding but truly bone-chilling story yesterday about how appealing the prospects of a default and a government shutdown may be to House Republicans.

According to the piece by Jim VandeHei, Mike Allen and Jake Sherman, forcing a default by not raising the debt ceiling and shutting down the government by not passing a continuing resolution may be the preferred ways to go by a majority of the House GOP caucus no matter what that would mean to the U.S. economy, the Republican Party's overall approval rating, the GOP's prospects for a Senate majority in 2014 or a Republican winning the White House in 2016.

To those of us who have watched Washington operate for a while, this obviously sounds like totally insane, crazy self-destructive behavior by the House GOP.

But it would be wrong to dismiss it out of hand. From the conversations I've had with Republicans House members and staff since the 2012 election, the threats, are real and make a great deal of political sense no matter how obnoxious and damaging it otherwise would be.

The key is the new House GOP politics of this decade.

I've repeatedly been told that, with redistricting in place, House Republicans are relatively certain they'll be able to maintain the majority at least through the end of this decade if they continue to appeal to the GOP base in their congressional districts.

The GOP's base's two biggest economic issues are tax and spending cuts. Therefore, taking a hard line in all budget debates is what makes the most sense politically and makes it most likely that Republicans will be in power for years to come.

Yes, not only is this is an admission that a Senate GOP majority and a Republican president may not happen for a while, it's also the strongest possible indication that House Republicans are happy to sacrifice the prospects for a national Republican party win to preserve their own influence and prestige. It also points out how and why House and Senate Republicans are often at odds with each other these days: The compromises that appeal to the Senate GOP may well be anathema to their House counterparts, and the take-no-prisoners attitude the House GOP adopts will likely hurt Republicans in the Senate.

The impact of this thinking is clear from the Politico story. If to a House Republican the opinion of your base in your district is far more important than the results of a poll of a representative national sample of voters, then the GOP's or Congress' overall approval rating is largely irrelevant.

That makes previously unthinkable moves like a default or a shutdown far more understandable...and likely than was the case in the past.



One correction

This line:

"The GOP's base's two biggest economic issues are tax and spending cuts."

really ought to read:

"The GOP's base THINKS the two biggest economic issues are tax and spending cuts."

That GOP base resides mainly in rural districts in the South and Midwest and benefits IMMENSELY from government spending on defense and farm/mineral/energy subsidies. They also tend to be older and either benefitting from or soon to be benefitting from Social Security and Medicare. They may love to talk about cutting government spending in the abstract and rugged individualism and all that, but that's all it is - talk.

Other than chnging the indexing of Social Security COLAs and raising the Medicare age (both of which while perhaps reasonable in the context of an overall etitlement reform package would have little impact over the next decade), what specific spending cuts have Republicans proposed? None that I'm aware of, just empty rhetoric about "cutting waste, fraud and abuse" and "shrinking welfare and foreign aid", no specifics.

In the end, the debt ceiling will be raised at the 11th hour because the business community that pays the GOP's bills will demand it. The sequester will be delayed for another month, because the GOP has no desire to see defense spending cut. The real fight will be over the expiration of the continuing resolution at the end of March.

Exactly. Obama is being very

Exactly. Obama is being very foolish, in my view, to believe that the GOP will do the sensible thing ultimately. He again appears unable to understand exactly how "crazy" that party is. If he were wise he would mint the coin, give it a big value, like 50 trillion dollars, and send it to the Fed where it would sit, in reserve, to be used if necessary. If the GOP turns sensible and gets rid of the debt ceiling it would never be used. But if the GOP is typically crazy, then it would be available for use. Why should he not take sensible precautions in advance?

Sounds like there is a

Sounds like there is a "reason" why the GOP base are arming themselves to the teeth.

I completely agree with Rue.

I completely agree with Rue.

federal spending

The GOP political power comes from the South, a region rich in Federal Spending that takes in far more Federal tax dollars then other regions. The overall Southern GOP will not appreciate significant reduction in government spending in there districts but the social conservatives could care less and this is where the rubber meets the road in the GOP. The South loves Federal pork spending expect Obama and the Democrats to cut spending in Republican States, not a pleasant prospect for the GOP.

Rue got it right. I also

Rue got it right.

I also reacted to the part: "The GOP's base's two biggest economic issues are tax and spending cuts. Therefore, taking a hard line in all budget debates is what makes the most sense politically". The GOP's base contains also many retirees. After the debt ceiling is reached, pay social security above a threshold only as Treasury's IOUs, and see how the richer retirees like the discount that they have to pay at the bank to get real US dollars.

Similarly, spend only IOUs for military contractors, as Rue suggested.

That's exactly why

it's so important that a Democratic President mint a $60 T platinum coin forthwith!

Because their base doesn't understand the debt ceiling...

The House GOP can only play this game only until their base finally understands that breaching the debt ceiling does not force spending cuts, it only delays it, makes it more expensive, and is a nihilistic response to a problem they frankly don"t really want to solve.

Maybe they will force us to briefly breach the debt ceiling, but the reaction from the markets is likely to be so immediate (I'm reminded of the stock market tanking after the first failed TARP vote) that even the intransigent members will get the message and they will raise it.

Two other things come to mind:

1) the debt ceiling is coming at a time when people are expecting their tax refunds. While it may not be clear exactly how Treasury would determine how to make payments to SS beneficiaries, bondholders, military personnel, etc., it seems that people waiting on tax refunds would be at the end of the line. That will certainly motivate the base even if a market crash doesn't.

2) For those who believe this hostage-taking is the only way to cut spending, I'd remind them that they have two at least two other hostage taking opportunities, the March 27 and Oct 1 deadlines for FY13 and FY14 appropriations. And at least those hostage taking opportunities actually shut down the government, more immediately result in cutting government spending, and have less far-reaching global ramifications, as compared with their fundamental misunderstanding of the debt ceiling limit.

shorter Stan post: "consider the Iron Law of Institutions"

Consider the "Iron Law of Institutions": the people who hold power in institutions are guided principally by preserving power within the institution, rather than the success of the institution itself.

The overall good of the party (much less America) are irrelevant to the incentives of any given Republican. No one in the GOP has the incentives, or perhaps even the inclination, to engage with reality on public policy-- or electoral demographics, for that matter.

It's been pointed out that today’s House GOP “consists half of people who think like Michele Bachmann ... and half of people who are afraid of losing a primary to people who think like Michele Bachmann.”

In the 2010 primary in a state of just under 900,000 people, Christine O’Donnell defeated her relatively sane rival for the GOP Senate nomination, Mike Castle, 30,561 votes to 27,021.

It doesn’t take that big a group of people to continue to successfully enforce idiocy in GOP primaries.

Folks from an ever-shrinking demographic and worldview can easily maintain a hammerlock on an ever-shrinking, ever more universally despised and irrational GOP.

Not in their base but in

Not in their base but in themselves (or maybe their wallets).

I'm not sure how you define the word "base". Typically it refers to large numbers of people not extraordinarily extreme or rich people.

The reason I'm puzzled is that I just don't get "The GOP's base's two biggest economic issues are tax and spending cuts." First note the key qualifier "economic". The Tea Partiers' key issues are immigration and environmentalism (against both of course). These are economic issues, but I am sure you meant economic to mean "fiscal" (at which point I must concede that taxing and spending are perceived by the GOP base to be a big part of fiscal policy ).

But you seem to assume that the GOP base wants to cut entitlement spending. Gee that's odd, the GOP ran against Medicare spending cuts in the past two elections. Self identified Republicans ferociously oppose cutting Social Security or Medicare. On taxes, in a recent poll, 51% of self described Republicans said they supported higher taxes on family income over $250,000.

On fiscal issues, the GOP caucus is way to the right of the median self identified Republican. I think the base you have in mind consists of elected Republicans themselves or of big donors and, especially, the wingnut welfare organizations.

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