Idiocracy – U.S. Government Shuts Down


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Many people, including myself, didn’t think it would happen, but the government of the United States, the most powerful nation on Earth, has shut down.  A social media intern at the White House, President Obama confirmed the shutdown on Tuesday via his twitter account.

obama tweeted

As I had discussed in my last post, Republicans in Congress, more specifically, Tea Party Republicans, started this whole debacle when the time came to pass a resolution to keep the government’s operations funded. But they insisted that they would only pass the bill if the bill also defunded Obamacare, which is another name for the Affordable Healthcare Act passed by President Obama in his first term. That bill was passed through the House of Representatives but was rejected by the Senate, which is ruled by the Democrats. As the deadline for the budget approached, both sides did not compromise and did not back down. There were rumors of a deal being passed in the last second where the Republicans would agree to have a budget passed in return for delaying the implementation of Obamacare for a year. Personally, I too expected a dodgy weak deal being passed in the last minute to kick the can down the road. That’s what Republicans and Democrats had done in the past when they were in time sensitive situations and were unwilling to compromise. However, that was not the case this time.

September 30th came and passed and the government shutdown. 800,000 federal employees have been sent home indefinitely and another 1.3 million continue to work without pay. That of course does not include the endless list of  government agencies that have been hampered.

Obviously the shutdown has important economic effects. A median of estimates by economists according to Bloomberg state that for every week the shutdown continues, GDP growth will be reduced by 0.1%. Additionally, the US Dollar declined in value against other currencies. However, markets have remained relatively calm. As evidenced by the graph from Yahoo! Finance, the S&P 500 hasn’t had a very big drop after the government shutdown on September 30th.

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This is because markets expect Congress to come up with a deal quite soon. Even though politicians from both sides remain adamant, investors believe a compromise is close. What is a cause to worry however, is the debt ceiling. Towards the end of this month, the American government will reach its legal limit to borrow money. Unless Congress raises that ceiling, the government will default on certain payments its obligated to make. If this shutdown prevents the debt ceiling from being raised, it could effect the entire global economy. The American economy and the US dollar is seen as the safest and most trustworthy financial investment. Many financial contracts across the world are written with the understanding that America will certainly pay its debt. If that assumption is broken, who knows what could happen. Finally, because the shutdown is slowing economic growth, the Federal Reserve is likely to delay tapering QE even further.

Now for a bit of my own opinion. There are certain parts of Obamacare that I like and certain parts of it that I disagree with. The fact that insurance companies can’t deny customers based on pre-existing conditions for example is a great idea. However, I’m against the mandate, which fines individuals if they do not purchase health insurance. I don’t think government can fine people for inaction. Its ok to tax transactions, but what prevents the government from forcing people to buy a certain company’s products for example. I’m sure Republicans disagree with certain parts of Obamacare too. But holding a nation hostage for a single law that has already passed is no way to act. Who’s to say that they won’t do it again for another law that they disagree with. And this doesn’t just apply for Republicans. If this precedent is set, Democrats might try it if they’re in the minority too. Making the people of a country pay for political bickering is not right. There are other ways the minority party can try to overturn a law they don’t agree with. They can try to convince members of the opposing party, they can go on the campaign trail and try to turn the people’s opinion against it, or they can make sure they win their elections and get enough seats to overturn the law. But, as I said before, forcing 800,000 people out of their jobs and leaving 1.3 million without pay, especially in these hard economic times is unacceptable. Saying that Obamacare will raise premiums might be correct, but nothing is worse than leaving people without a job.

If the shutdown drags on for too long, maybe America can learn a lesson from Australia. When there was a similar government shutdown in Australia in 1975, the queen came in and fired everyone in parliament. That begs the question, if America had a cold no-nonsense queen, who could it be?

hillary-clinton

“It’s to us Norwegians, hard to understand that it can be happening in one of the most influential countries in the world that you can have such a dysfunctional government. It is kind of a joke or disbelief. We laugh about it”
-Andres Tvegard (journalist for the Norwegian Broadcasting Corporation)

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