Fiscal showdowns

Business Insider has a summary of a new poll out highlighting the political dynamics of the coming October fiscal showdowns. Perhaps as one would expect, by large margins the general public would blame the GOP for government shutdowns or failing to raise the debt ceiling:

Only one-third of respondents said they would blame President Barack Obama in the case of a shutdown. That’s down from 38% back in March, and it leads to a significant split that could place the blame mostly on the shoulders of Republicans…

But according to the CNN poll, if it’s [the debt ceiling] not raised, 54% said they would blame Congressional Republicans. Only 25% would blame Obama.

To be quite honest, I don’t think national polls are going to matter a whole lot for the fiscal showdowns; house members are much more concerned by the breakdowns in their specific districts, and, if I had to guess, I would say the politics of threatening to breach the debt ceiling in order to defund Obamacare look a lot better in a gerrymandered GOP district than across the general public.

However, two other figures from the poll jumped out at me; both of which are a little terrifying:

Combined, 62% of respondents said that a failure to raise the debt ceiling would either lead to a “crisis” or “major problems.” And 74% said the same about a government shutdown if it lasted “a few weeks.”

The poll also shows vulnerabilities for Obama. Only 43% approve of how Obama is handling the economy, and 36% approve of how he’s handling the federal-budget deficit.

To the first point above–it is absolutely terrifying that 1) 38% of the country is basically ok with breaching the debt ceiling and 2) that more people worry about a government shutdown than going over the debt ceiling. To me, this demonstrates that the general public doesn’t understand the issues at play here at all (not totally surprising).

The US can handle a government shutdown. It would cause some short term economic pain; a significant number of people might lose access to services from which they benefit; government contractors will be delayed in carrying out projects, etc. In sum, not a great situation. But in the grand scheme of things, also not a big deal–six months from now, a blip on the radar (if the shutdown were to only last a couple weeks); 5 years from now, an after-thought.

On the other hand, going past the debt ceiling (into default) would cause irreparable damage to the American economy. Forever. American borrowing costs would likely have a premium for decades; it’s difficult to quantify, but the likely impact (both directly, through higher debt-servicing costs, and indirectly, through impact in the broader economy) would be well into the Trillions of dollars. Keep in mind, this is the same GOP that purports to be worried about government spending; and, here they are, willing to breach a debt-ceiling that will cause the US government to spend Trillions of more dollars than it otherwise would have had to, all in an effort to de-fund a law that was passed to help hold down the cost of medical care, which is the biggest long-term driver of government spending. The fact that this is supported by 38% of the country terrifies me, and it should terrify you as well.

The other statistic that jumped out at me is that only 36% of people approve of the way that Obama is handling the budget deficit. From Krugman:

As you can see, the budget deficit has decreased significantly over the past 5 years. We have done, as a country, WAY TOO MUCH deficit reduction; it’s actively inhibited economic growth over the past 3 years. There is a pretty robust, non-partisan literature out there right now demonstrating that fact. Unfortunately, as Krugman points out, a Google survey indicates that only 17% of the population know that the budget deficit has been decreasing.

NO WONDER no one approves of the way that Obama is handling the deficit; they have no idea how he is actually handling the deficit. And, for me, that leads directly to the biggest failure of the Obama presidency–if you are going to do the economically dumb thing and reduce the deficit too fast for political reasons, wouldn’t you at least make sure that people knew you were reducing the deficit??? Instead, Obama ends up in a world where he has presided over pretty (self-inflicted) mediocre economic performance, 80% of the country thinks he blew up the deficit doing it (which is not only inaccurate, but it reduces political pressure for more fiscal stimulus, which is what is needed), and, to all outside appearances, Obama and his team seem quite pleased with their performance. This does not inspire great confidence before the October fiscal showdowns.

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