The economic rationale behind the US shutdown madness

Republicans in the House of Representatives have voted to repeal the Affordable Care Act (ACA), or parts of it, 41 times as of last count. One can thus conclude that the Republicans, or the GOP (“Grand Old Party”), see advantage in staking out a public position against ACA, whether this be with voters, donors, primary opponents, or all of the above. Note also that the Republican triumph in the 2010 congressional elections came at a time when “Obamacare” was a major political issue and perhaps they are looking to repeat such a climate of political opinion.

By shutting down government over ACA defunding, the GOP is once again staking out a public position – this time a very public position – against the law. Such a statement is more focal, and generates more publicity, than a 42nd vote for repeal, which would be very much a non-event. Everyone is talking about the shutdown and it dominates the headlines. If you’ve voted 41 times for repeal, you will like this publicity.

That said, the Republican Party, and its representatives, will bear costs from being associated with the government shutdown, which is inconvenient, hurts the economy, and lowers the international status of the United States. We don’t know how long the shutdown will last, but it is only a matter of time before the more radical factions of the Republican Party give in. In any case, that is a purely political calculation and it is not especially mysterious or “irrational.”

It seems to me that ideally the GOP would prefer to “negotiate” forever, without having to shut down the government at all, for the attendant publicity value. But of course, deadlines are deadlines, and we have now met this one.

The GOP also wishes to combat the notion that it is the intransigent party, and a battle over the relatively unpopular ACA (“why will Obama negotiate with Putin and Assad but not with us?”) is a better arena for them than most others.

The GOP, from its budget strategies, also hopes to repeal the medical devices tax, although at this point even the Democrats who oppose the tax may be reluctant to serve up a symbolic victory to the other party. The best bet is still that the status quo ex ante holds.

Recent events are public choice theory in action, and they show that “rational agent” models of politics very often apply, even in times that otherwise appear crazy.

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Author: Tyler Cowen is Professor of Economics at George Mason University

Image: Night falls over the U.S. Capitol Dome in Washington, September 30, 2013. REUTERS/Jonathan Ernst