That the fixation with Obamacare has now led to a government “shutdown” is bad policy and politics. For all its flaws, Obamacare was duly passed by Congress, upheld by the Supreme Court and (indirectly) affirmed by the 2012 election. Government cannot function if determined minorities threaten to stop many of its operations every time they lose a major vote. Americans dislike disorder; they will (rightly) blame congressional Republicans for the shutdown’s disruptions and any economic ill effects.
And, paradoxically, Obamacare’s public image might actually benefit. Without a shutdown, Obamacare’s critics could blame its start-up problems on the program’s inherent flaws. Now, its defenders will claim that the program is being sabotaged by Republicans.
Unless it lasts for many weeks, the shutdown should have only a modest economic impact. Many “essential” services continue, as do most benefit programs, including Social Security, Medicare and Obamacare. These programs involve “mandatory spending” and are “authorized either for multi-year periods or permanently,” notes the Committee for a Responsible Federal Budget. The shutdown applies only to programs whose funds must be appropriated annually by Congress.
By contrast, failure to raise the federal debt ceiling — now $16.699 trillion — could be much more damaging because the government couldn’t borrow the money it needs to sustain all its operations. If the safety of Treasury debt (bonds and the like) were put in doubt, interest rates might rise. “Consumer, business and investor confidence would be hit hard, putting stock, bond and other financial markets into turmoil,” economist Mark Zandi of Moody’s Analytics recently told the congressional Joint Economic Committee. The Treasury says it may need more borrowing authority by Oct. 17.
That’s why any shutdown negotiations should also include an increase in the debt ceiling. But whether the White House will engage is unclear. President Obama has repeatedly said he won’t negotiate the debt ceiling: Congress should raise it as a matter of course, he says. This sounds responsible, but it ducks the real budget issue, which is coping with the steady rise in spending on the elderly.
Here, Obama is as guilty as his tea party and Republican foes of evading a true debate. He hasn’t confronted the reality that Social Security and Medicare are slowly squeezing most other government programs and putting upward pressure on both taxes and deficits. The central budget problem is to reconcile what’s politically popular today with what’s good for the country tomorrow. Obama’s failure to frame the debate in these terms has left a political vacuum — into which has poured much frustration, hypocrisy and destructiveness.