The Federal Government Shutdown: Mistakes on Both Sides

The federal government shutdown has now extended to its tenth day, and the two sides are still not negotiating, so there is no end in sight at this point.

The debate over how to resolve the shutdown will take on increasingly greater importance as the calendar moves closer to the October 17th deadline for Congress to raise the debt ceiling limit to be able to pay the country’s bills and avoid a default.

The two sides have opposing views on the debt ceiling deadline with Democrats in Congress and President Obama saying it will be catastrophic for the economy if Congress does not raise the limit; while Republicans feel that the President is trying to scare the public and that the country will be able to make payments on the bills even after the October 17th deadline.

In my opinion, both sides are wrong about this entire situation, they have created a mess and the American public will be the most impacted by this unfortunate mishandling of this issue by our elected officials.

The original issue: the Affordable Healthcare Act

The original issue here was and still remains the Affordable Healthcare Act, or “Obama Care” as it is collectively referred to by Congress and the media.

In very simple terms, the Republicans, particularly the Tea Party faction of the party are not in favor of “Obama Care” and they want the entire bill to be repealed. Most of that sentiment stems from their belief that the individual mandate is not feasible and that they do not believe in any new taxes. A tax increase will be needed to fund the national health care plan which the Affordable Care Act would create.

The Republicans, particularly the Tea Party, want to defund the Affordable Care Act as a provision of any future budgetary agreement which is made between Congress and the White House.

Conversely, the Democrats believe very strongly in keeping “Obama Care” on the books, and they wish to pass a “clean spending bill” which does not have any mention of the “Obama Care” program. The President has also stated that he would veto any bill which attempted to defund “Obama Care”.

My issue with this situation is that they are all wrong in how they reacted and are still conducting themselves. President Obama should have negotiated some of the terms of the Affordable Care Act in the months leading up to this important debt ceiling deadline.

 Congress has voted over 40 times to repeal the Affordable Care Act, they would not take that type of action that many times unless a significant number of people had issues with the health care plan.  Congress will only take that kind of action if their constituents express concerns over an issue or a bill.

President Obama should have recognized this earlier and negotiated some changes to the health care program and compromised. The Republicans need to be more flexible at this point to passing a temporary spending bill to end the federal government shutdown, and to raise the debt ceiling while continuing to negotiate with the Democrats and the President.

Both sides handled this poorly, how can the average American parent explain a federal government shutdown to their child? How is their behavior a good example for the children in this country? Was that even a consideration?

This federal government shutdown was the wrong decision by the Republicans to address this matter. It also sets a bad example for the country. This type of response by both sides is in no way a good indication of the way adult human beings should handle conflict.

The Republicans should look to compromise and work with the President while passing a temporary spending bill. The President should have been more receptive to Congress to avoid a shutdown in the first place.

The Debt Ceiling

The reports I read today in the media, particularly one in The New York Times, have all indicated that the Republicans do not believe that the credit default would be a disaster.

In fact, the Republicans believe that the Treasury Department has enough reserves and will take in enough in tax revenues to be able to cover the debt payments for a while beyond the October 17th deadline.

Some other financial studies I read today state that the initial payments could be made, but at some point in mid- November the government would have an issue meeting the payments necessary to keep the country running. Even though the government brings in a certain amount of tax revenue each day, the system in the Treasury has large lump sum type payments due at certain intervals which would surpass the current revenue streams without a debt ceiling increase.

The Republicans believe that the Democrats and the President are using the debt ceiling as a “scare tactic”, and that in fact, we have reserves and revenues to cover the payments.

In fairness, when President Obama was in the Senate in 2006, he was against raising the debt ceiling. Some members of Congress are frustrated that the President could be against raising the debt ceiling then, and pushing Congress to raise it now. This sentiment is also exacerbated by the perception that the debt ceiling needs to be raised to cover the costs of programs that the Obama Administration has created.

I agree that some of the programs constituting “big government” should be reviewed or eliminated, but holding the country in a shutdown and effecting the lives of everyday Americans is not a constructive method to bring about that change.

The Republicans believe that the Treasury Department could continue to make the debt payments by prioritizing the bills which get paid, and pushing off other items of less significance.

In what I have researched that is potentially problematic for a few reasons:

1.     The Treasury Department bill paying software systems are not calibrated to prioritize which bills should get paid and which should not be paid. The system is set up to pay each bill as it comes into the system.

2.     The Treasury Department handles 100 million monthly invoices so that is virtually an impossible task to prioritize what invoices should get paid.

3.     Without the ability to borrow, then the debt payments and other necessary services will have to be funded ahead of Social Security payments and payment of military disability benefits.

Economic Consequences

If the debt ceiling is not raised then the Democrats and the White House counter that we will be in for economic chaos. I read some other reports today in the financial sector where some believe that a default by the U.S. federal government will mean that the U.S. dollar will plummet, the credit markets will freeze, and it will create higher borrowing rates for the U.S. in the future.

The reports all seemed to agree on one thing: it will have a negative impact on the economy whether the federal government remains shut down and still attempts to pay the bills without raising the debt ceiling, or if the federal government defaults both roads will lead to a recession or worse.

The consequences for the world financial markets could be very severe if the U.S. goes down this path further and remains at a stalemate.  

My question is: With an economy that is still limping back from the recession, why risk plunging the country back into another one?

Both sides need to come together and figure out a short term and long term resolution to this situation. Both sides have made miscalculations but they need to get back on track. The American people will suffer the consequences of this shutdown, many already have felt the effects of it. Our leaders on both sides need to put their differences aside and come to an agreement to get our country moving in the right direction.