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Thursday, October 24, 2013

'A Very Expensive Tea Party'

Simon Johnson:

A Very Expensive Tea Party, by Simon Johnson, Commentary, NY Times: The recent government shutdown and confrontation over the federal debt ceiling gained the Republicans nothing,... – and may have cost them politically... But it slowed the economy and undermined confidence in public finances in a way that will have a significant negative impact on future budgets of the United States. None of this should make for an appealing strategy, but Tea Party Republicans are giving every indication that they want to do the same thing again early next year. Their more moderate colleagues need to take a firmer hand.
On the political gains from recent tactics, it is hard to find any good news for the Republican side as a whole. ...
The shutdown and debt ceiling brinkmanship did real damage to the economy. ... 
Members of the Tea Party movement express concern about the longer-run federal budget... But their tactics are directly worsening the budget over exactly the time horizon that they say they care about. ...
The major long-term issue the United States faces is rising health-care costs..., but an important part of our projected future deficits is interest costs...
The United States dollar is the world’s primary reserve currency and safe haven; the asset that major investors, such as central banks and big international companies, actually buy is United States Treasury debt. ...
Over a longer period of time, of course, investors get the message: United States Treasury debt is not so safe... Unwittingly and perhaps inadvertently, the Tea Party is helping to fulfill the prophecies of ... Arvind Subramanian, who has long predicted that the renminbi will eclipse the dollar... Speeding up such a transition will directly increase the interest cost of the national debt and exactly run counter to what Tea Party representatives claim they want to do. ...
In the American system,... the ... only force that can rein in Tea Party extremism – and get the nation off the road to fiscal ruin – is resurgence among Republican moderates. Unfortunately, their recent performance has not been impressive.

    Posted by on Thursday, October 24, 2013 at 12:52 PM in Economics, International Finance, Politics | Permalink  Comments (3)

          


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