As the deadline nears for national default if Congress does not raise the debt ceiling, the two parties appear deadlocked over ending tax breaks for the wealthiest Americans, which Republicans oppose, and deep cuts to Social Security and Medicare, which Democrats reject. In our current political environment, and with Tea Partiers and pending Republican primaries in the mix, it is conceivable that leaders may allow the country to default for the first time in our history, with catastrophic results. But doing so would be Armageddon not only for our economy, but for conservatives in America.
In order for conservatives to sell their world view of limited government, unregulated financial markets, and ever-lower taxes, they need government’s positive role in our daily lives, and in the economy, to remain invisible to the public. When government’s image is as a giant, lumbering ogre—good for military defense, but too clumsy for any other purpose—the conservative take has resonance. But when Americans are reminded that our federal government is about airline safety and mail delivery, healthy food and safe workplaces, Coast Guard and Internet, a different picture emerges.
That’s why the last government shut-down worked so powerfully in President Clinton’s favor back in the 1990s. Americans value the federal government’s role as protector of fair rules, opportunity, and the public interest, even as they are often skeptical about its competence.
Economists agree that national default would be devastating, with consequences ranging from collapsing financial markets to plummeting pension funds and 401(k) savings to the disappearance of loans Americans need to get a mortgage, buy a car, start or expand a business. Unemployment would rise, and the economy could slip into another Great Depression. Think of the financial chaos around the possibility of default by Greece, then multiply that by ten thousand.
If conservatives are irresponsible enough to let default happen, its dire consequences will dispel their depiction of the private economy as an efficient and independent actor that suffers when government gets involved. It will remind Americans that the economy needs government, including government debt, to operate.