On Friday, under the leadership of Speaker John Boehner, the House passed the Continuing Resolution (CR) bill that will fund the government through November but, at the same time, de-fund Obamacare. The vote was largely on party lines. The Senate Majority Leader, Harry Reid, said that this CR bill is "dead, dead" in the Senate. President Barack Obama has said that even if the Senate miraculously passes this bill, he will veto it. So the question is why would House Republicans push this bill, knowing full well that it could never become the law, and unnecessarily risk a possible government shutdown in ten days. Also, the House Republicans are refusing to increase the debt ceiling unless Obama agrees to additional spending cuts, setting the stage for the government to default on its debt. Last time, when Republicans tried this approach in 2011, the government debt got downgraded from AAA to AA+. Now we are on the verge of another downgrade from AA+ to AA, which will dramatically increase the interest payments due on national debt, and thus sharply increase the budget deficit. It is clear that the House Republicans have no strategy beyond passing the CR bill or refusing to increase the debt ceiling; they have not really thought through the consequences of their actions or figured out the endgame.
The Republican approach is so wrong at so many different levels:
- First, they want to reduce the budget deficit, but their actions would actually put upward pressure on interest rates and thus lead to higher deficit because of increased interest payments on debt.
- Second, de-funding a program, which was approved by the Congress, signed into law by the president, and subsequently upheld by the USSC, is not the proper way to get rid of that program. If they really think that Obamacare is a bad idea, then the correct way to get rid off it is to offer amendments or an alternative health care proposal, get it passed in the House and Senate, and have the president sign it. That's how democracy works. You cannot threaten to shut down the government (which means military personnel fighting in Afghanistan will not get their paychecks and elderly people will be denied their monthly Social Security checks) unless you get what you want. Republicans cannot use blackmail as a tool to achieve their political goals. If this blackmail worked, could Republicans use it again to de-fund other programs such as Medicaid, Medicare, or any other program that they didn't like? What we will have then is not democracy but chaos.
- Third, the Congressional Republicans have an approval rating of only 12% compared with Obama's 45%; so the question is why would Republicans threaten to shut down the government and end up paying a huge price at the ballot box? Last time, when Republicans played this game in 2011, they failed to win the presidency and lost seats in House and Senate in the 2012 election - so why would Republicans play the same game and hope to achieve a different outcome in the 2014 election? The chances are that they will actually lose the control of the House in 2014.
- Fourth, in 2011, Republicans' threat to shut down government crashed the stock markets and reduced business confidence, which led to corporations putting their capital expansion plans on hold. These ramifications led to reduced job prospects and slower economic growth. If Republicans shut down government this time, the people, with their decimated 401(K) and IRA accounts, will again blame the Republicans for their losses.
On the question of increasing the debt ceiling, Obama is right in saying that Congress passed the spending appropriation bills and they alone are responsible for making sure that the United States does not become a dead beat on its debt. The Congress must pass a clean bill increasing the debt ceiling so the government does not default on its debt and become a laughing stock around the world. However, in the long-term, reducing budget deficit and debt is of paramount importance to preserve and enhance our prosperity for the future generations. Therefore, Democrats and Republicans must urgently work together to address the dislocations caused by unwise across-the-board cuts under sequestration and hammer out a balanced plan that would increase revenues via tax reforms and also cut spending through meaningful reforms of the entitlement programs. The voters desperately want the Congress and Obama to work together and reach a compromise on the issues of budget deficit and national debt.
