DEFCON jam: Red alert for the U.S. economy and the GOP

WELL, IT’S come to this: The impasse over the United States borrowing-authority debt ceiling has gotten so critical that economists at one major financial concern has taken to putting things in military terms. On Wednesday, Morgan Stanley economists Vincent Reinhart and Ellen Zentner announced their decision to characterize the American economy as being at "DEFCON 3," borrowing from the defense readiness condition acronym used by the U.S. military (and popularized in more movies than we can count).

“"Conditions in Washington, D.C. are not improving; we see nascent signs of financial stress, and jitters are on the rise," the economists reported in a research report excerpted in Business Insider.

In the Morgan Stanley DEFCON scenario, just like the military’s, the lower the number, the higher the risk of catastrophe. The economists write: “It seemed appropriate to borrow from another arbitrary risk assessment of cataclysm – NORAD's DEFCON. In our Econ DEFCON, a reading of 5 suggests everyone remains complacent about the outlook as there will be no meaningful fallout from the stand-off. The warning level then ratchets up to 1, which signals our expectation of a significant disruption to the U.S. economy.”

To go by that metric, then, we’re halfway to some unprecedented economic meltdown creating real damage, and real pain. And as the risk of global calamity ratchets higher, what’s in straits more dire is the Republican Party, in the throes of an identity default that’s been going on for years, one that now threatens its own existence and the financial well-being of the United States.

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The mainstream media has lately taken to cultivating a false equivalence in the matter, using tortured populist logic and a thoroughly misguided sense of journalistic balance to pin the blame for the standoff on Democrats and Republicans equally. Thankfully, the public knows better, and has said as much in various opinion polls in recent days.

According to a new Gallup poll, only 28 percent of Americans have a favorable view of the GOP, a drop of 10 percentage points in a month. The current crisis is terra incognita in more ways than one: Gallup said the showing for Republicans was a “record low” in its polling. “[T]his is the lowest favorable rating measured for either party since Gallup began asking this question in 1992.”

The Democratic Party has had its detractors too; according to Gallup, 43 percent of Americans support its role in the crisis, down just 4 points from last month.

But the Gallup survey offered a striking example of what it looks like when Republicans turn on their own: “Self-identified Republicans are more than twice as likely to view their own party unfavorably (27%) as Democrats are to see their own party unfavorably (13%),” Gallup reported.

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THE GOP's unfavorable rating among Republicans is up eight points from September, compared with a one-point rise in Democratic Party unfavorables among Democrats. These findings may be consistent with the widely circulated narrative that the Republican Party is internally splintered on how best to handle the budgetary negotiations,” Gallup said.

And in a memorandum released on Sunday, Public Policy Polling reported that 24 new polls, conducted by PPP and commissioned by MoveOn.org, concluded that, “[I]f the 2014 elections were held today, Republicans would be in grave danger of losing control of the House of Representatives.”

What makes this such a potentially huge deal is the circumstances surrounding such a loss of the House. “The surveys challenge conventional wisdom that gerrymandering has put the House out of reach for Democrats and indicate the shutdown has significant electoral implications,” wrote Ilya Sheyman, at the MoveOn Web site.

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The reasons for this implosion of Republican fortune have a lot to do with a Republican Party at odds with itself. “It’s very hard to negotiate with Republicans when they can’t negotiate with themselves.” House Democratic Leader Nancy Pelosi said on Saturday.

The GOP’s perverse penchant for brinkmanship seems to have at its core a fundamental confidence in the American economy to bounce back from any crisis — even one that’s thoroughly contrived. There’s a faith in the notion that the U.S. economy will have a “nick of time” event, some deus ex machina scenario that rescues it from disaster at the 11th hour.

Treasury Secretary Jack Lew is less than confident of that. “As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy,” Lew said in a statement last week. “Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need — a self-inflicted wound harming families and businesses.”

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THERE’S A TRIAGE process that’s been in the works for the last three weeks – going back to when the White House Budget Office first told agencies to prepare for the worst.

Now, there’s real damage being done. On Tuesday, the Veterans Administration furloughed 7,000 employees and shut regional offices. VA Secretary Eric Shinseki said Wednesday that 433,000 fully disabled veterans may not receive disability payments starting in November if the shutdown isn’t shut down, and fast.

The shutdown forced the temporary closing of the Nuclear Regulatory Commission, the agency tasked with preventing the nation’s 100 nuclear power plants from having a Homer Simpson moment. In a Wednesday press release, NRC chairman Alison Macfarlane said that “[d]espite our best hopes, the NRC on Thursday will be joining the rest of the federal government in shutting down due to a lapse in appropriations.”

USA Today reports today that the national park system is losing $76 million a day due to the shutdown. And the government coma has had a ripple effect that includes other agencies, including the National Transportation Safety Board, the nation’s first recourse in accident investigation, and the Pentagon, which was forced to suspend the $100,000 death benefits paid to the families of servicemembers killed in the war in Afghanistan. Charities have stepped up to fill that shortfall, but still ... it should never have gone that far. Never.

Clearly, for Americans, the impact of the shutdown ain’t theoretical no more.

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So it’s no wonder that Americans are reacting unfavorably to Republican tactics. Reacting in a way that suggests there will be hell to pay down the road.

George W in The New York Post writes: “I can see Obamacare for what it is: deeply flawed, but better than nothing. And NOTHING is exactly what we got during the first 6 years of Bush II, when Republicans controlled everything. I firmly believe that this whole Republican panic has come about because there are enough bright souls involved with the party that they have figured out that a LOT of their base, perhaps even a majority of it, is going to figure out that they are far better off under ‘Obamacare’ than they were before, and THAT will be the very end of the ‘Republican Brand.’ ”


Wilbur Standish offers the GOP some barbed advice in The Post: “In 2012, the Republicans lost the popular vote in the Senate, House, and Presidency. If not for gerrymandering the Dems would hold all three branches. In a constitutional democracy, there is a process to make, change or repeal laws. Instead of appealing to a small group of constituents, [the GOP should] appeal to a majority, win elections and change laws, that's the way the system works. Quit being bitter about Obamacare and give people a reason to vote for you in the next election.”

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BUT THAT’S just everyday people, the citizens that Republicans feel they can ignore. Harder to walk away from will be the GOP donor class that’s starting to walk away from them. “We are finding a marvelous way to grab defeat from the jaws of victory,” said Fred Zeidman, a Houston businessman and a big donor to the campaigns of Bush 43. “The way we are handling this has been a mistake from the beginning. I think we misread where the country was.

“The Tea Party is not looking at the big picture,” he told The Daily Beast on Oct. 3. “In the long run it will have deleterious effects on the whole party when we could have taken the high road. There is so much going on right now with Obamacare, and no one is saying a word about it.”

“I am not writing a check to anyone,” he said.

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There may be a way out of this, sort of. On Thursday, House Republicans offered the president a short-term deal to increase the debt ceiling for six weeks — a lousy, short-leash method for the world’s pre-eminent economic power to do its business.

We’ll see where this goes. Early White House reaction wasn’t exactly effusive. “Our position is clear: they ought to turn on the lights, they ought to pay our bills," White House press secretary Jay Carney told Michael McAuliffe of The Huffington Post. “The logic here is that they would harm the American economy and the American people in order to try to extract concessions from the president and their counterparts on Capitol Hill. That's an unsustainably bad proposition.”

“Republicans may let one hostage go, but they are keeping a gun to the head of the other, while reserving the right to kidnap the first one again in a few weeks,” a Senate aide told McAuliffe earlier today, seven days until the Oct. 17 borrowing authority deadline.

“As reckless as a government shutdown is, as many people as are being hurt by a government shutdown, an economic shutdown that results from default would be dramatically worse,” Obama said last week, speaking to construction workers at M. Luis Construction in Rockville, Md. “The United States is the center of the world economy,” Obama said, “so if we screw up, everybody gets screwed up — the whole world will have problems.”

Call that DEFCON 2. Or DEFCON 1. Call it a ham sandwich if you like. Whatever you call it, the countdown to catastrophe is still on.

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Image credits: DEFCON chart graphic: © 2013 Morgan Stanley Research. Cracked GOP logo: The Huffington Post. Gallup logo: © 2013 Gallup. PPP logo: © 2013 Public Policy Polling. Homer Simpson asleep: From “The Simpsons” © Matt Groening.