The End is Nigh. So say the media, counting down the seconds to a partial shutdown of the U.S. government. Certainly Americans will miss some federal functions, and the media will focus eagerly on victims--real and imaginary--of the impasse (though, curiously, the government clocks out for two days every weekend, and most people seem OK with that). At the same time, we will be reminded that life goes on beyond the state.
The enduring memory of the last shutdown, in 1996, is that the economy hummed right along despite the fact that the federal government was closed. Suddenly, much of government didn't seem so necessary after all. The American people proved quite adept at handling our own affairs in most matters. It was before--not after--that shutdown that President Bill Clinton told the nation that "the era of big government is over."
Earlier this year, President Barack Obama warned Americans that the budget sequester--his idea, proposed during the debt ceiling negotiations of 2011--would create apocalyptic damage. That is still, basically, the White House line, blaming slow economic growth on spending restraint. No one buys it--and the president did himself considerable political damage by exaggerating the pain Americans would suddenly begin to feel.
The government shutdown may be a repeat. It forces Washington to do what it pretends is impossible--to prioritize among government functions, to designate some programs and even some departments as "non-essential." That causes some hurt feelings, but it is reality. And among those non-essential parts will be new opportunities for savings that Minority Leader Nancy Pelosi recently claimed simply aren't there.
This particular shutdown is complicated by the fact that it coincides with negotiations on the debt ceiling, which could have a direct impact on the stock market and the country's credit ratings. But there are some who are already predicting that the fight over a government shutdown could make a deal on the debt ceiling more likely, not less. And it is hard to measure damage to an economy already badly damaged by bad policy.
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