With the drama over raising the debt limit in Washington DC reaching its final act this week, things are actually looking pretty good for Republicans. Despite the President’s bluster and demagogy in speeches and press conferences, the Republicans in the House have actually submitted and passed plans to deal with the debt crisis; the Democrats are too afraid of the public’s reaction to even write their position down on paper. Public sentiment is solidly behind cutting government spending, and the Democrats know it. And at the end of the day, if the Republican’s spending cuts aren’t accepted, the debt limit will be reached, and spending will be cut. While Speaker Boehner should eventually craft a compromise that raises the debt limit, it likely will disappoint many Republicans who would prefer him to hold out for more.

Other than for the concern that voters might blame Republicans for the shutdown, many conservative Republicans would actually welcome a partial government shutdown. Stymied by Democrat control of the Senate and White House, they have learned that even the smallest of spending cuts are going to be opposed ferociously, and a cap or a balanced budget amendment won’t stand a chance until 2013. Failure to allow additional borrowing essentially equates to an immediate balanced budget amendment, and conservative’s dreams of rolling back the growth of the federal government and eliminating extra-constitutional departments such as Education become suddenly within reach. If the deadlock last months much of the federal bureaucracy that has been added in the last 50 years could be permanently stunted from lack of funds.

Still, there are some very real risks to taking a hard line that have nothing to do with taking the direct blame for the shutdown or risking a debt default.

The movie “Cold Turkey” told the tale of an entire town that accepted a challenge to quit smoking all at once, and the mayhem that ensued.  Now imagine that the debt limit is not increased for a few weeks and the government concludes that food stamps are one of the things it just doesn’t have money for. What kind of disruption would we see when almost 50 million Americans have to give up food stamps “cold turkey”? I suspect the kind of voter fury that would be unleashed won’t be aimed rationally, but strike everything in sight.

The federal government currently borrows over 40 cents of every dollar, and sends out about 70 million checks a month. In rough terms, that means that if the debt limit isn’t raised, starting in August the government has to decide which 40 million checks to send out, and which 30 million to hold. Does anyone believe that the Obama Administration has teams of experts preparing the furlough notices, program alterations to the automated payment systems, and detailed lists of essential and nonessential positions, ready to implement in the event of a shutdown? Most likely we will see chaos on a scale never even contemplated, with millions of payments made that they meant to stop, millions of payments not made that were intended to be paid, and perhaps even bounced checks by the million. The possibilities for incompetence are limitless.

But these are just errors of commission; there are also errors of omission to be worried about. As we saw with the shutdown in Minnesota, there are impacts that no one even realizes can occur. MillerCoors found itself facing a requirement to pull all its beer brands off the shelves (almost 40% of all beer sold) because its brand license renewal was not approved before the shutdown. Hundreds of bars were running out of liquor because they couldn’t get their liquor purchase cards renewed. Fishermen couldn’t get licenses, but could still get fined for fishing without a license. Sure, these are small inconveniences, but what happens when this gets translated to the federal level? People won’t suddenly drop dead of food poisoning if the USDA inspector is off the job for a few weeks, but will food still get shipped to the stores without his sign-off? Airplanes won’t suddenly fall apart, but will they be allowed back into service if the FAA agent isn’t there to ok it? Or what if our nation’s air traffic controllers are inadvertently laid off, does the entire air transport sector come to a screeching halt? One consequence of an Interstate Commerce Clause that has expanded to include federal control over virtually every transaction (and in the case of ObamaCare, non-transaction) in America is that not a lot can happen without federal approval. When I was younger, people used a phrase to describe over-reacting – “You don’t have to make a federal case out of it!”  I don’t hear it used that much anymore; perhaps because we have realized that today, everything IS a federal case.

From what I’ve seen so far of this President’s administration, I’d be very reluctant to bet the US economy on expectations of their competence in a crisis. Best we take a small victory now and wait until 2013 for the big gains.


[photo credit: flickr]