Shutting the government down has in the past and this time cost the taxpayers billions of dollars. The law Congress passed this time promising that government workers will get back pay when the this self-inflicted wound is healed almost adds insult to injury.
It does not make government workers whole because they bear the transaction costs of making do while Congress plays this game out.
It does not make taxpayers whole because they lose the services of the government workers for the duration.
It does not even address the losses of the workers who depend on the spending of government workers or of visitors to government facilities that are closed.
The bottom line is that the functions of government that produce revenue are shut down while the functions that spend continue, albeit with some of the spending delayed. The workers who care for the animals in the national zoo are critical so the animals don’t die, but the workers who enable us to visit the animals are not.
Shutting down revenue while maintaining expenditures may sound crazy, but it’s fairly harmless compared to the debt ceiling we are approaching for the first time since 2011.
Having learned nothing from the 2011 fiasco and the last minute deliberations that brought us the brainless across the board “sequester,” thought to be unlikely to happen because it was so stupid on its face, Congress wants to once again threaten not to pay for expenditures Congress has already authorized.
The last time Congress did this, it increased the government’s borrowing costs by $18.9 billion, according to the Bipartisan Policy Center. It took three months for attendance at Treasury auctions to normalize. That’s just the impact on the public purse. Interest rates on Treasury notes cascade into my pocketbook and yours in the form of mortgage and credit card rates.
Those are the known results from just coming close to default. Suppose there actually were a default?
The worst case scenario—sheer paranoia, I admit—would be if our dear friends the Chinese decided to take a hit on their US dollar denominated debt in the interest of playing the long game. While we are in default, they could float the Renminbi, a decision which has been the only thing holding up a renegotiation of the Bretton Woods Agreement. The US dollar would be replaced as the world’s reserve currency by a “basket” of currencies, making room for the Eurodollar, the Yen, the Renminbi, and others to be negotiated.
By moving while we are in the midst of a self-imposed crisis, the Chinese would minimize our share of the basket and maximize their own. Of course, our dear friends would never take advantage of us while we are down, would they?
Shutting down the basic functions of government to gain leverage otherwise unavailable to a minority, like the claim that Congress can order an expenditure and then refuse to allow sale of Treasury notes to pay the bills, are bad ideas. Every time they are tried, the taxpayers bleed.
It's not true the left has never entertained this bad idea. Ted Kennedy and Fritz Mondale gave it a shot in 1973 to reform campaign finance law...and they got hammered for it. It's a bad idea.
Government by serial fake crises is a very bad idea.