Government shutdown 2013: why it may be most important one ever

Government shutdown 2013, if it happens, could surpass the impact of the 1995-96 shutdowns. For one thing, the economy today is much softer than it was in the mid-1990s.

If the government shuts down at midnight Monday – as now seems likely – the effects on the US economy and political system could be profound. In fact, 2013 might be the most consequential shutdown ever, surpassing the impact of the Bill Clinton/Newt Gingrich standoffs of 1995 and 1996.

For one thing, the economy today is much softer than it was in the mid-1990s. Back in ’95, the Federal Reserve’s biggest worry was that the go-go years had gone too far and the economy was in danger of overheating, resulting in an inflation spike. So the Fed hiked interest rates, cooling things down at the end of year.

That produced a “soft landing” from which growth of US gross domestic product took off in ’96. GDP growth was 4.7 percent for the second quarter, after the brief shutdown period was over. Overall GDP growth for the year was about 3 percent, and unemployment fell to 5.4 percent.

Nowadays, the jobs picture is much bleaker. Unemployment is 7.3 percent as the economy continues to struggle to recover from the Great Recession. Second quarter GDP growth was 2 percent, and economists are predicting a 2013 GDP rise of 1.5 percent, or a bit higher.

So a shutdown this time would hit an economy that’s easier to push off its feet. For each week the government is closed, fourth quarter GDP would shrink by 0.2 percent, according to Nariman Behravesh, chief economist at IHS/Global Insight in Lexington, Mass. A lengthy two-month shutdown would probably push the United States back into a recession, according to Moody’s Analytics chief economist Mark Zandi.

Second, a government shutdown might reshape the modern Republican Party. That’s because the ongoing political struggle over how to fund the US government and whether to defund or delay Obamacare is a very untraditional political battle. It has the usual component of a Republican versus Democrat fight, but the more important front may be Republican versus Republican, as tea party conservatives push for a confrontation that establishment Republicans don’t appear to want.

The question is how far House Speaker John Boehner will go in adhering to tea party preferences. To this point, he has shown willingness to back down in the face of opposition from his conservative wing. He would have preferred a clean funding bill to keep the government open, but instead has brought to the House floor versions of the bill that would defund or delay Obamacare, ensuring their doom in the Senate.

Unlike previous speakers, Representative Boehner does not appear to believe that making the government work is part of his job description if doing so conflicts with the will of his conference, writes Caitlin Huey-Burns at RealClearPolitics.

“One thing has become clear over the past three years of divided government and so-called crisis governing: As speaker, Boehner is changing the definition of a representative government,” she writes.

A third and related point is that the impending government shutdown, if it occurs, could reflect a change in the role of political minorities in the US legislative process.

We’re defining “minority” here in the context of the branches of the US government. The GOP controls the House, while Democrats have the Senate and White House.

As Democrats point out, House Republicans are now attempting to reverse or slow a law (the Affordable Care Act) that was duly passed by majorities of both chambers of Congress and signed by President Obama in 2010. The House GOP has linked its effort to the must-pass omnibus spending bill in an attempt to overcome the fact that the other side has more votes, in the sense that the Senate and White House count as two to the GOP’s one.

Provoking a fight that could lead to a government shutdown over a law that’s not directly related to the bill at hand is an escalation of Mr. Gingrich’s 1995 tactics. Gingrich and President Clinton were (mostly) fighting over the levels of spending in the government funding bill itself.

Will this set a precedent for future conflicts where one congressional chamber wants to do something that the other chamber and the president reject? That will depend crucially on the outcome of the current partisan standoff, of course. And for Democrats who think only tea party adherents would push things this far, consider this thought experiment: Would their party not fight as hard to defend Obamacare as conservative Republicans are fighting to repeal it?