Can Tea Party afford the shutdown cost?
Victories come in many sizes. The Battle of the Little Bighorn, for example, at first seemed an overwhelming win for the Sioux. But it soon became clear their success would not last. Who really won the Alamo? The Mexicans? Try telling that to a Texan. So, who won the Battle of the Shutdown 2013? The conventional view is that the Tea Party Republicans were seen off by the congressional leadership in both parties. Having made their protest, disrupted the nation and cost Americans a great deal in anxiety, time and treasure, they lost the battle — but promise to resume the war another day. Perhaps as early as January.
While moderation appears to have triumphed and dogmatic extremism held at bay, the 800,000 federal workers and those who need their services were the obvious losers of the budget and debt ceiling battle. But so were those who hoped to derail the Affordable Care Act, freeze federal government spending and balance the budget.
A complete audit of the shutdown, however, shows the Tea Partiers suffered a more profound setback than they would like to admit — or perhaps even know. The exact philosophy of the Tea Party is hardly clear, but in as much as there is a manifesto it states: the government is too big and should shrink; government borrowing is out of control and the nation should live within its means; big business executives are unfairly propped up by government even when they make sizable mistakes; the government should stop manipulating the dollar through quantitative easing, and taxes should be reduced but never be raised.
It is a visceral creed, born of anger at the government’s bailout of the bankers in 2008-9 and the scale of the borrowing to prevent a full-blown slump, heavy on dogma but light on intellectual rigor. It could be called Austria Lite — all the prejudices of the big conservative thinkers without the trouble of having to read what they wrote.
The scale of the revolution that the Tea Party is attempting to foment is vast. It would turn the last 80 years of the federal government’s largely bipartisan social and economic policy on its head. It would entail closing government departments, privatizing popular entitlements like Social Security and Medicare and shrinking the military by withdrawing U.S. troops from abroad. It would mean deliberately slowing the pace of economic growth, returning to “sound money” that does not inflate and forcing Congress to stop spending other people’s money.
Eventually, it is argued by those who have faith, unhampered by democracy’s dead hand, market forces will reassert themselves and the economy will boom even more than before. Like the exploration of Mars, it is a long-term project. Along with the Chinese, Christians, Islamists and old school Communists, the Tea Party revolutionaries are playing a long game. Vienna wasn’t built in a day.
Or at least that was the original plan — until Senator Ted Cruz (R-Texas) spotted his chance to leap ahead of the 2016 presidential pack. Instead of the Tea Party biding its time, making the long democratic march through the primaries, winning Congress and the presidency, and rolling out the Tea Party program in a hundred days of hectic executive action, they followed Cruz into the shutdown. Cruz is a middle-aged man in a hurry. Like any good consumer, he demanded action this day.
“I want it now!” is not the cry of a seasoned political operator. Only once in a while, after a landslide that sweeps the White House and both houses of Congress, can big changes be achieved quickly. The rest of the time, patience is the friend of the radical, who must bide his time until the perfect opportunity arises.
As the uproar surrounding the shutdown has shown, last month was not a good time to start an uprising.
The Tea Party may never entirely recover from its intemperate adolescent foot stomping. The political cost can be measured by the evident, irrefutable slump in electoral support for the Republicans, and by bringing into the open the chasm between moderate Republican big dogs and the Tea Party tails that wag them. The cost of the closedown, however, moves the economic goals of the Tea Party movement further away than ever.
If one goal the shutdown was to discredit conventional economic theory, it has failed. The economic argument implicit in the Tea Party’s thinking is that if you slow economic activity by halting federal spending the economy will do well. The 10 days of shutdown, however, cost $3.1 billion in lost gross domestic product and $24 billion in lost economic activity that can never be recovered.
Rather like grasping the extent of damage done by a natural disaster, the full details of the losses Americans and the United States suffered as a result of the shutdown, of the threat of a shutdown and recovering from the shutdown will not become clear for some weeks. Those in the Tea Party who hoped the shutdown might actually save money must be sorely disappointed.
An early indication of how the Tea Party’s self-harming is self-defeating can be seen from the Federal Reserve’s verdict that the shutdown has prompted the delay of the “tapering” of quantitative easing (QE), the only economic policy government is left with and one the Tea Party particularly detests. Only a month ago the prospect of an end to QE was causing the stock market to catch the vapors. Now the markets are riding high, in the sure knowledge the shutdown has put off until next year, perhaps even March 2014, the day the Fed stops pumping $85 billion into the economy each month.
The Federal Reserve chairman, Ben Bernanke, and his prospective successor, Janet Yellen, have tied the end of QE to unemployment. Joblessness is now running at 7.2 percent — and the Fed has announced it will continue QE until unemployment is below 6.5 percent. So long as the Fed is in crisis mode, business confidence will continue to wobble, and new investments will be put on hold.
The best way to pay down the national debt is to prompt the economy to recover fully — so that everyone is back to work — and then tax them. By slowing the already laggardly economy, the shutdown has not only delayed the recovery, it has postponed the Tea Party revolution sine diem.
What about the impending budget talks? Did the shutdown not force the Democrats to concede entitlement reform? No.
It may well be that the grand bargain that emerges between now and the end of the year will trade some entitlement reforms with changes to the tax code that will increase taxes. With the Senate Majority Leader Harry Reid (D-Nev.) riding high, and with Senate Minority Leader Mitch McConnell (R-Ky.) insisting he will not threaten default in the latest negotiations, it seems even the Tea Party’s hope of not raising taxes will be dashed as a result of the shutdown.
So, what was the shutdown all about? For Cruz — and the rest of us — it was an expensive episode in promoting his career. For Tea Party members, however, it was a chance to draw attention to their grievances.
The fact that they left the check to be picked up by their friends and neighbors is of little concern to them. They have fully infiltrated one of the two alternating parties of government and hope it is only a matter of time before the pendulum swing lands them in government.
However, that complacent narrative has been set back by the viciousness of the shutdown and it has drawn voters’ attention to the Tea Party’s true aims and methods. The unpopularity of closing the government has put the Tea Party on notice: be nice or be defeated.
There seems little indication that either Tea Party supporters or populists like Cruz have understood the nature of the defeat they have just suffered. Instead, heartened by friends in the press, the political wreckers and vandals are plotting their next wave of wanton destruction.
Nicholas Wapshott is the author of Keynes Hayek: The Clash That Defined Modern Economics. Read extracts here.
PHOTO (Top): Senator Ted Cruz (R-Texas) talks to reporters after a Republican Senate caucus meeting at the Capitol in Washington, October 16, 2013. REUTERS/Jonathan Ernst
PHOTO (Insert): People hold signs at a Tea Party Patriots rally calling for the repeal of the 2010 healthcare law on Capitol Hill in Washington, March 24, 2012. REUTERS/Jonathan Ernst