Emboldened by President Donald Trump’s low approval ratings, Special Counsel Robert Mueller’s investigation into alleged Russian collusion and expectations for a bloodbath in the Midterm Elections in November, Democrats slammed the door on a temporary budget deal with Republicans. Refusing the latest Continuing Resolution [CR], to fund the U.S. government, Democrats chose to toss some 850,000 non-essential federal workers out of their jobs, suspending pay for the armed forces and shuttering the National Parks Service. Senate Majority Leader Chuck Schumer (D-N.Y.) decided, with House Minority Leader Nancy Pelosi (D-Calif.,), to stick it to Trump on his one-year anniversary in office. Democrats insisted on a continuation of Deferred Action Childhood Arrivals [DACA], the so-called Dreamers, all 700,000 currently living and working in the U.S.
Instead of playing ball with Democrats, Trump pandered to his anti-immigrant base, taking DACA off the table, a deal-breaker for Democrats. Trump ran in 2016 on a get tough with the borders and illegal aliens platform, opposing amnesty approaches that grandfathered in children of illegal immigrants. Schumer and Pelosi felt energized by Trump’s bad poll numbers, expecting voters would blame Republicans for the government shutdown. Whether that happens is anyone’s guess. When yesterday’s midnight deadline passed, it signaled bad news for financial markets Monday, knowing, if nothing else, that the U.S. government is dysfunctional as ever. When you consider the minor concessions needed to keep the government running, both sides act recklessly, knowing that some compromise will be reached to reopen non-essential government services.
House Speaker Paul Ryan (R-Wis.) bent over backwards to reach a deal with his Democrat counterparts. “This is exactly the tactic that they decried four-and-a-half-years-ago,” said Brendan Buck, adviser to Ryan. “It think it’s quite a moment in American politics that Democrats have so quickly embraced what they once called ‘arsonist’ tactics. This is a party moving so hard and fast to the left that it’s almost difficult to process,” said Ryan. Republicans see little grounds for compromise but know that the government can’t stay shut down for long. When it happened Oct. 1, 2013 to Oct. 17, 2013, the government lost some $24 billion in lost revenue, setting back economic recovery. Democrats rejected a three-week CR by Sen. Lindsey Graham (R-S.C.), looking to a long-term budget deal that includes DACA and funds the Childhood Health Insurance Program [CHIP].
House and Senate Republicans want no part of costly budget-busting social programs, detracting from the GOP’s priority to increase defense spending. “We did it [the current CR] for a month,” said Sen. Tim Kaine (D-Va.). At some point it starts to look like the purpose is to delay, not get at deal [long range].”. Montana’s Sen. John Tester, up for reelection in November, said “at some point it starts to look like the purpose [of a CR] is delay, not to get a deal,” something obvious to both parties. With so much wrangling on both sides, CRs are about all both parties can get in the ear of gridlock. While Schumer blamed the shutdown on Republicans, the public looks divided on whom to blame. Democrats think they have hot-button issues on their side, especially DACA, backed by some 80% of the public. Banking on recent trends, Democrats think they can bloody Trump and the GOP more.
CNN’s recent polling, however valid, showed that 56% of respondents think it’s more important to reopen the government than to demand a fix to DACA. Holding federal workers hostage until they get what the want, Democrats risk a backlash shutting down the government. At some point, the pressure shifts back to Democrats to put federal workers on the job, not play hardball with Republicans. Getting the government refunded requires an increase in the national debt, something unavoidable in today’s deficit-spending economy. Shutting down the government sends a bad message to Wall Street currently in an unprecedented bull market, something that could start unraveling. If markets come unglued, voters could punish Trump and the GOP in November’s Midterm elections. On the other hand, if the GOP blames Democrats for a Wall Street meltdown, it could boomerang.
Shutting down the government shows that politics takes precedent over non-essential government workers. Both parties know they must settle their dispute at some point before it has disastrous consequences on the economy. Democrats want an extension of DACA and the CHIP children’s health care program. Trump wants money to build his border wall. Both parties can compromise but only if they put the welfare of federal workers over politics. With everything riding on the Midterm elections, Democrats took a calculated risk to shutdown the government and give Trump a black eye on his one-year anniversary in office. Before Wall Street and the economy tanks, both parties must pull back from the brink and find common ground. Continuing DACA and CHIP should be no big deal for Democrats. Freeing up some cash for Trump’s border wall isn’t the end of the world.
