How a small gaggle of thickheaded Republicans could derail the entire global economy for a decade.
Short of zombies roaming the Rayburn building and eating defenseless young, it is hard to imagine a more dystopian environment than the U.S. House of Representatives right now. It is as if the Republican Party -- not content to rest on the laurels of President George W. Bush ushering in the 2008 global financial crisis and his disastrous mismanagement of the Iraq invasion and its aftermath -- is bound and determined to demonstrate that a minority political bloc within a minority political party can ruin U.S. foreign policy even without controlling the executive branch.
Between the ongoing government shutdown and the looming uncertainty over raising the debt ceiling, the extremist Tea Party faction of a GOP once known for its responsible internationalism is already imposing staggeringly high costs on the United States and the world. And I mean costs, literally. One can only reach the conclusion that either the Tea Party believes that almost every economist in the world is wrong or they are deliberately sabotaging the global economic recovery.
The Republican Party of the 1970s, 1980s, and 1990s understood that the global business community thrived on predictability and recoiled at uncertainty. Today's Tea Party and the emasculated Speaker of the House John Boehner think nothing of eroding the very foundations of international financial stability as a cheap negotiating ploy. As an analysis from the Council on Foreign Relations indicates, the 2011 confrontation over the debt limit pushed the Dow Jones industrial average down some 2,000 points, cost taxpayers $19 billion (over 10 years in higher borrowing costs), and caused Standard & Poor's to downgrade America's credit rating. Consumer confidence plummeted, and private-sector hiring dried up, going from an average of 184,000 new jobs a month during the first seven months of 2011 down to 52,000 in August of that year.
Perhaps even more costly, is that from China to Europe to Latin America, the repeated head-butting in Washington over the debt limit is pushing more and more finance ministers to lose faith in the dollar as the preferred global reserve currency. When exactly did the party of Nelson Rockefeller and Milton Friedman make a collective decision that destroying the dollar was good for America's economic prospects and national security? And, why would any party choose to inflict such willful damage on America's hard-won global economic brand?
Every American diplomat and aid worker now faces a heavier and heavier lift as they try to promote democracy abroad. Tyrants will simply shake their heads at American efforts to promote open government, pointing out that the U.S. system can't even manage to keep the doors open or stave off spiraling economic uncertainty.
If the Tea Party gets what some of its members seem to openly hope for -- a default -- most economists suggest that we will be facing a massive global economic stock sell-off and a second global recession, just as many economies are showing signs of revival. Expect nothing less than near panic in the global financial order.
The former chief economist of the International Monetary Fund, Simon Johnson, describes the repeated face-off over the debt ceiling and prospects for default as an act of "collective insanity," noting that such irresponsibility in 2011, "put more pressure on European sovereign debt at an inopportune moment, pushing up yields across the troubled euro zone (including, but not limited to Greece)." Consequently, not just America's recovery suffered. The risk substantially increased that Europe will now face a "lost decade" similar to that suffered by Japan with little or no economic growth.
But shutting down the government in Washington and risking a default around the debt ceiling should not really be called "collective insanity." Granted, I take no issue with the "insanity" part of that formulation, only the suggestion that this is "collective" madness. The American public overwhelmingly opposes shutting down the government or risking default. A Quinnipiac poll found that only 22 percent of Americans supported such brinkmanship around either a government shutdown or the debt ceiling, and that number will likely only shrink further as the public realizes the stupidity of such an approach.
The real question is how the Republican Party, the American public, and indeed the world will respond to break the stranglehold on collective interests and civics of a belligerent, destructive minority within a minority. Just as William Buckley and the National Review led the charge to shun the paranoid ravings of the John Birch Society in the 1960s, the time has now come for the Republican Party to reclaim its soul.
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