Thursday, October 17, 2013

When Will Taxpayers Learn? An Embarassed (Freshly Self-Neutered) GOP Needs To Learn To Love the Idea of Default...


The one (mythological) issue that unites right and left is that federal default, even though the numbers involved would be token, would drive a massive recession; this despite the fact that we've defaulted before, not to mention that credit that migrates away from Treasuries would reach real economic ideas. This is the latest big lie unfairly foisted on Americans by the anointed; literally the same people who said failure to bail out Citi would lead to the 'Mother of All Great Depressions.'

By John Tamny @ Forbes

A Wall Street Journal headline from Wednesday in many ways told the ridiculous tale of a very minor federal government shutdown, and the subsequent cave by a scared-of-its-own-rhetoric Republican party.  “Uncertainty Chips Away at Prestige” was the headline, and the article alleged reduced prestige for the U.S. globally in light of a budget fight taking place domestically.

It all sounds very bad until we remember that the headline was mostly aimed at our political clout.  In the politics profession, one’s prestige is a function of how much he or she can fleece the taxpayers for highway systems, airports, space programs, and yes, healthcare on demand that’s ‘generously’ provided by the government.  No doubt in the ‘spending the money of others’ sense, U.S. political class prestige vis-à-vis its serial plunderers globally is well down in light of the just ended budget fight, but then isn’t that the point?

Quite unlike the rest of the world where political power is the rule, the U.S. was founded by very wise men who first granted the federal political class a government, then proceeded to severely limit that same government’s power and prestige.  In that case, a budget impasse driven by frustrated Americans surely is a blow to the political class’s international prestige among politicians. With good reason.  The ability to dole out big sums of other people’s money serves as the proverbial scoreboard in politics.  But then we’re not like the others, and that’s a good thing.

The Republicans gave in on their budget fight, they essentially did so for nothing in return to read the media accounts, and a common explanation for why is that the polls were moving against them.  In short, politics drove their decision to hand President Obama a victory, but by virtue of Obama winning, this wasn’t very good politics.  Either way, the Republicans talk a big game about limiting their time in very alien Washington, D.C., but then given a chance to risk their plush jobs in Congress on their professed belief in limited government, they quickly retreated.

To the above, the popular answer is that for the Republicans to truly shrink government they must control it through elections.  That all sounds nice, but as evidenced by a prescription drug benefit, Sarbanes-Oxley, along with nosebleed spending increases when they controlled Congress in the early part of the 2000s, the notion that Republicans would reveal government-shrinking prudence once in power isn’t terribly compelling.  Better it would be if the GOP had continued to keep the federal government shut down, thus revealing an ability to control as least parts of federal spending. This would have to be better than the post-shutdown headlines we’re seeing now describing how the Republicans lost to President Obama.....

The response to such a strategy beyond the supposed political hazards is that the Republicans would have been foolish to risk a federal default.  Comical here is that if there’s one thing that brings liberals (New York Times editorial page), conservatives (Wall Street Journal editorial page), bombthrowers for the right (AEI’s Jim Pethokoukis), and bombthrowers for the left (Paul Krugman) together, it’s that a federal default would be a “disaster” (Bret Stephens – Wall Street Journal), and that such an occurrence would be quickly followed by a recession.


READ the whole great thing and get ready for more, in January, 2014.

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