On a July evening in 64 A.D., a fire erupted in Rome and is said to have burned for days, eventually destroying three districts and severely damaging seven more (out of a total of 14 districts). Legend has it that the reigning emperor, Nero Claudius Caesar Augustus Germanicus, played the fiddle while the city burned.
There’s no question that the fire happened, but whether Nero entertained himself by playing a fiddle while a conflagration raged through Rome is open to debate. It might have just been a story created by a political adversary intent on discrediting the emperor. Regardless, the U.S. federal government, and by extension the entire U.S. populace, is facing a massive crisis right now. Congress hasn’t approved a budget for the next fiscal year, which starts on Oct. 1, so we’re all holding our breath to see how the next few days go in Washington. Will our representatives roll up their sleeves and start cooperating, or will they continue to quibble while business owners are left in limbo, wondering what’s coming next?
Of course quite a bit of government and government-related activity will continue. Military deployments and engagements will continue, agencies with a role in public health will keep their doors open, Social Security checks will be mailed, mail will be delivered, the President and Congress will continue to draw paychecks, and so on.
The heart of the issue is an ideological impasse. “Impasse” is the key word. Representatives since the dawn of time have been tasked with finding compromises, initiating a bit of give-and-take, to further their constituents’ interests. Regrettably the current House of Representatives and Senate are plagued by a few who are too obstinate to negotiate.
We can’t lay all the blame at the feet of one group or the other, but I think it’s fair to say that quite a few conservatives parading around under the tea party banner have done a lot to draw attention to themselves in this regard. The modern vanguard was Ronald Reagan, fondly remembered by many conservatives for pushing through a substantial number of tax cuts and reducing government spending. He set the stage early in his campaign with a folksy metaphor: “John Anderson tells us that first we've got to reduce spending before we can reduce taxes. Well, if you've got a kid that's extravagant, you can lecture him all you want to about his extravagance. Or you can cut his allowance and achieve the same end much quicker.” The strategy was known as “starving the beast.” Meanwhile, the Democrats are clinging to Obamacare like a drowning man hanging onto a life preserver.
Both sides think they have the high ground, but I am not so sure. First, Reagan’s record. Although many tax cuts were passed on his watch, the federal debt was about 35 percent of gross domestic product (GDP) when he took office, and it was closer to 55 percent of GDP when he left office. As far as Obamacare, the Law of Unintended Consequences is already in full play. Sure, it will be a boon to people who have no health insurance, but some companies already are planning to reduce all positions other than management to part-time positions, thereby jettisoning a huge portion of their insurance liability, because under the law they don’t have to provide health insurance to part-timers. This could turn into two big problems in a hurry. First, it might overwhelm the Obamacare program with applicants. Second, it could eliminate a huge number of full-time positions, making it that much harder for people to build fulfilling, successful careers.
The core issue, of course, is uncertainty. Government contractors or not, businesspeople don’t know if a spending bill is going to pass soon, and therefore they don’t know if the government is going to continue to run at full capacity, they don’t know if the government is going to continue to pay all of its current invoices, the don’t know if the government is going to honor all outstanding contracts, they don’t know when the government is going to make future purchases, they don’t know all the details about Obamacare, they don’t know how it will affect their business, and on and on. Don’t take my word for it—the Dow Jones Industrial Average dropped 100 points this morning. It wasn’t huge, less than 1 percent, but it is a symbol of the frustration in the business community.
A lot less fiddling around in Washington would be a big help at a time like this.