Right now the government has shut down with no end in sight and the debt ceiling approaching again. If you were to read the news, there are no winners, which is a preposterous idea. Politics is theater, and Ted Cruz is in the middle of a command performance at the Old Vic.
Once again, the Tea Party has won, and it’s not even close.
Consider the factors here. The Tea Party wants only a shell of a government, responsible for defense, immigration and mailing Social Security and Medicare checks. They have an utter disinterest in social or Federal infrastructure. With the government shut down that is exactly what is happening now. They would like this to be the status quo, so the longer this goes on the better.
The quality they admire most in a candidate is utter intransigence, which is exactly what they’re getting out of Ted Cruz. The Republican Party will buckle, they’ll have to, because the repercussions of a default are catastrophic, but Cruz will come out as the guy that wouldn’t back down no matter. With his constituency, it’s a home run.
The Tea Party is backed by corporations and well heeled billionaires, all of whom benefit from understaffed, underfunded and demoralized Federal Regulators and an overwhelmed Department of Justice. And this time, Obama won’t buckle, having learned from the last time he was held hostage. This bill is his legacy, after all.
There’s only one problem.
Even though there are some winners, what no one realizes is that there are more losers than you think.
For instance, the Federal government is the single largest employer of Americans. Laying them all off simultaneously is disastrous. At the very least, it means that families have to cut back their spending, the single most important factor in an economy’s health. They stop driving, stop eating out, stop seeing movies, stop buying clothes, stop going on vacation, and so on. (And if there’s one thing Federal employees have, its vacation.)
Since the decline in manufacturing, America has relied more and more on service industry… which is based on people having extra money. (Or states that rely almost entirely on service industry and tourism…like Republican states Florida and Hawaii. Good luck balancing those budgets!) So if Federal workers don’t have money, no one else has money.
Some of those workers will get fed up and entire the private sector, which doesn’t help unemployment numbers, but the higher the unemployment, the better the stock market, right? And since the Tea Party is a combination of rich people, retirees and any crossover therein, a healthy stock portfolio is a good thing, right?
Except when people don’t spend money, GDP goes down. And so does the stock market. You know what else affects the stock market? The entire world watching our government have a tantrum. It weakens confidence and that affects markets which hurts stocks.
Well, maybe you’re going to have ease the losses from your portfolio with the bond/annuity market for a while. The only problem is, if we default on our debts in a week or so, even the rate of return on safe investments will get a little dodgy because the government might not be able to afford to pay back certain rates of return.
Now it’s been less than a week, so it isn’t exactly the end of the world yet. But it’s not good. And the people that pay are the ones that can’t afford to wait, the old, the poor, the sick… and the middle-class. Everyone pays.
Even Ted Cruz will pay after a while. Politics is about compromise and alliances, like it or not. He’s done a great job of tearing his party apart, and making the leadership look bad. That sort of thing does not tend to go away. And at some point if Cruz becomes more of a party leader, he might find himself dealing with people that liked his business model and aren’t inclined to be co-operative.
But for now, there’s pontificating, prognostication and finger-pointing. And why not? Its theater season after all.