The Government Shutdown and the Debt Default Issue: The Dreadful Lesson

October 18, 2013

by Mario Rizzo

I grant that the government “shutdown” and the perceived threat of default on the debt was a public relations disaster for the Republican Party. I think that the shutdown problems, like those of the Sequester, were grossly exaggerated by the traditional media and as well as by various left-wing hysterics. Neither of these spending or service adjustments affected the overwhelming majority of our (excessive) government spending.

The default problem could have been much worse. It would have presented the following options: Delay payments to bond holders, axe discretionary spending, and/or cut entitlement spending. Another possibility would have been to continue borrowing anyway, perhaps provoking a Constitutional problem. I believe that had this continued for only a few days not much would have happened that would not have been quickly undone afterwards. However, none of this activity would have served the interests of reducing the size and scope of government.

So what is the “dreadful lesson”? It is this. We do not know how to reduce the size of our Leviathan state. Tea Party critics are correct, for example, that the longer ObamaCare stays unaltered or unrepealed the harder it will be to get rid of it. This is not because it will suddenly turn out to be good but because, as with so many other laws, special interests will benefit and will not easily yield.  How well have the efforts to find alternatives to Social Security and Medicare gone?

Provoking crises will not work. The current Republican Party does not seem competent enough to devise clever political methods to accomplish the goal of smaller government, even if it were truly willing to do so. (And that is debatable.)

So we are left, politically speaking, with nothing. How dreadful.

7 Responses to “The Government Shutdown and the Debt Default Issue: The Dreadful Lesson”


  1. For lack of a better reasoned approach, accross the board cuts of 5-10% a year would help reduce the leviathan.


  2. The current Republican Party does not seem competent enough to devise clever political methods to accomplish the goal of smaller government, even if it were truly willing to do so. (And that is debatable.)

    No, it isn’t debatable. Irrefutable evidence has been coming in for decades, proving the Republicans are as wedded to big government as the Democrats. Putting one’s hopes in seriously reducing the size of Leviathan on any any political organization is akin to wishing on a star.

    The shutdown had one very good impact. It proved to many watchers that congress and the president are so utterly incompetent that trusting them to solve any critical problem or accomplish any important objective is akin to wishing on a four-leaf clover.


  3. “Shutdown costs US billions in wages, shopping, more,” says the headline today. As Mario says, however, this is hysterics. If you look at aggregate data, you couldn’t detect the effects of any of the other 17 shutdowns. What money wasn’t spent during the shutdown will be spent afterwards.

    Temporary pehenomena generally have no permanent effects. Temporary phenomena have only transitory impacts. That is why stimulus spending or temporary tax cuts have no permanent effects.

    The battle deserved to be fought, but not the way it was fought. It is a skirmish in a long battle, however.

    There is a way spending could be cut, but it requires more political entrepreneurship than I am seeing. I suggest people go back to Cong. Dick Armey’s base closure commission. He consciously incorporated Public Choice reasoning into the statute. It actually worked. We need a program closure commission.

  4. Bill Stepp Says:

    You refer to “excessive” government spending, which implicitly assumes some level of government spending that is not excessive. Government spending can be divided into two types, that which is spent on actions that would be better done privately, and that which shouldn’t be done by anyone. The former includes things like law, courts, defense; the latter includes spending on pols (Congress), the POTUS and his temple at 1600 Pennsylvania Avenue in Washington, Dumb City, the IRS, the FBI, the Offense Dept., the DEA, Homeland Security, antiSocial insecurity, Medicare, and many more things.


  5. For scholars who would like to see the size of government shrink, I believe a valuable service could be offered by study of the best sequence in which to dismantle government programs. Suppose that such study is undertaken. The results become known and available. Then, in a happy future day when a little power actually falls into the hands of free-market advocates, those leaders may know how to proceed while causing minimal societal disruption.


  6. Mart Laar, former PM of Estonia, wrote a book on how they liberalized a communist country into a laissez-faire example. I think it is titled The Little Country that Could.

  7. Potpourri Says:

    […] Mario Rizzo has gotten even more pessimistic since I left NYU. I must have been a cheering […]


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