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Notes on the Political Train Wreck

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-- The House actually pinged two bills back to the Senate: one that conditions funding the government on defunding the health care law, and the other that exempts military pay from the shutdown. I suspect the Senate will unanimously approve the latter. The former will lead to the shutdown.

-- There's a line of thought (e.g., from Ezra here) that says the shutdown lessens the likelihood of failing to raise the debt ceiling, and thus defaulting. The idea is that the shutdown goes very badly for the Republicans and wakes up complacent outside forces that pressure Speaker Boehner and other House Republicans to block the radicals when they try to do the same thing with the debt ceiling.

Hmmm... maybe. The logic is rational enough, though one can weave other pathways that are much less reassuring. The House radicals will not have spent their crazy on the shutdown -- they'll be sure to push for default. So once again, this is a matter of whether Speaker Boehner will allow the vote for a clean lift of the ceiling to pass with support from the Democrats. I think he will -- perhaps he's thinking, "I let the Cruzers have the shutdown, but I can't let 'em push the default," so I still regard the likelihood of default as low. But it's far from zero.

-- I went to a party Saturday night with people from all walks of life, and amidst a bunch of headshaking at how screwed up everything has gotten, the most common question for me was, "why do they hate Obamacare so much?" Note that this question was decidedly not from people who had strong feelings either way about the law. Most of the folks I spoke to about this viewed the law like a utility company, which is kind of how I see it: a regulated solution for a necessary societal good with public and private characteristics, like electricity.

The solution to this problem must involve risk pooling, and that implies mandated coverage, which in turn requires subsidies for those of low and moderate incomes. And there you have it -- health care reform in a simple sentence. Sure, there are lots of other ways to get there -- one could ask why there isn't a "Coffee Party" threatening default unless they get single payer. But most people intuitively get the above, and fundamentally don't get the connection between Obamacare and... oh, I don't know... the Fugitive Slave Act.

The answer is something like this, I think: the radical opposition has decided to organize around repeal, and that's all they need to know. They're robotically carrying out their marching orders. Who's giving the orders? For that, you have to follow the money to those financing the Tea Party, whose goal is much less government, much less social insurance, and much lower taxes on their income and wealth, which they now control more of than at almost any time in the last century.

-- There's still an economy out there. Early next week, I'll turn back to what I should be writing about: economic conditions. It's not just that policy makers are not helping to deal with our still too fragile recovery and still elevated unemployment rate. It's that they're seriously threatening to make it worse. The shutdown hurts a little more, as does not dealing with the sequester. And fooling around with the debt ceiling is far worse.

Of course, one bright spot around all this from the obstructionist's perspective is that we won't know as much about the damage they're doing because we won't get the economic reports we need until the statistical agencies are re-funded and can release their reports.

For example, this Friday is when the September jobs report should come out, but the Bureau of Labor Statistics says they won't be able to release it in a shutdown. This is particularly bad timing, because a) the Bureau has already collected the September data and will just end up sitting on it, and b) the Federal Reserve is (appropriately) in high data-driven mode right now and they need these data in a timely manner to gauge the taper (i.e., to determine when they slow down the pace of their asset buys).

More to come as developments develop.

This post originally appeared at Jared Bernstein's On The Economy blog.