Commentary

Default could yet sink GOP — in Michigan and nation

10/18/2013

DETROIT — Exactly half a century ago next year, the Republican Party fell considerably out of step with the nation — and even more out of step with Michigan.

The results were disastrous. Michigan Gov. George Romney survived that fall’s election, but only by distancing himself from the GOP presidential nominee, Barry Goldwater — who became the only candidate in history to lose Michigan by a million votes.

The Michigan GOP lost four seats in Congress, eight in the state Senate, and 21 in the state House.

Nationally, it was even worse for the GOP. Republicans were left with fewer than a third of the members of Congress.

President Lyndon Johnson and his fellow Democrats could and did pass Mr. Johnson’s Great Society legislation — and pretty much anything else they wanted — with scarcely any effort.

Could a similar disaster be about to occur for Republicans? There are disturbing signs for the party. A recent Gallup poll showed that nationally, fewer people like the GOP than ever before. The polling organization found that only 28 percent of Americans have a favorable view of the GOP.

More than twice as many — 62 percent — have an unfavorable view of the GOP. Granted, voters aren’t in love with President Obama’s party either, but the Democratic Party’s numbers are much better. Democrats were viewed favorably by 43 percent; 49 percent viewed them unfavorably.

The government shutdown and the bitter stalemate in Congress have hurt the standing of all politicians, especially those in Washington. Yet Gallup and a bevy of other polls seem to indicate that people blame Republicans more. That was the case when there was a shutdown in 1995, an event often seen as starting President Bill Clinton on his way to a relatively easy re-election a year later.

But the stakes are higher this time. Nobody before had seriously suggested that the United States might default on the national debt. Although default is off the table, this week’s deal only extends the debt limit through early February.

To the shock of the business and financial communities, several influential GOP members of Congress said they thought default, either now or in the near future, might not be so bad. Sen. Richard Burr (R., N.C.) claimed Washington was saving nearly enough in salaries during the government shutdown that it could afford most of the costs of servicing the debt — something economists said wasn’t even close to true.

U.S. Sen. Rand Paul of Kentucky, a potential GOP presidential candidate in 2016, told the New York Times that he saw failing to extend the debt ceiling as shock therapy to force the government to balance the budget. “If you propose it that way, the American public will say that sounds like a pretty reasonable idea,” he said.

Not, however, to those who know money. The U.S. Chamber of Commerce and the National Association of Manufacturers, two thoroughly GOP-leaning groups, urged Congress to raise the debt ceiling.

Banking analyst Dick Bove of Rafferty Capital Markets told CNBC that if the nation should default, “the devastation to the United States would be so severe that it would take decades to recover from the depression” that would cause.

Unemployment would soar. The value of the dollar would plunge. Those whose retirement funds are in stocks and bonds would see much of their value wiped out.

Nor would that be all. Rightly or wrongly, our economy has been sustained for years by our ability to borrow billions of dollars from other nations. They lend it to us for the same reason children in Toledo buy U.S. savings bonds: Their money is guaranteed by the full faith and credit of the United States of America.

That’s why the dollar has been the world currency for decades, and why other nations link their currencies to the dollar, not the euro. If that ends, the value of the dollar, and of everything of value in the United States, would plunge.

The impact of a default might also paralyze lending. Financial analyst Mr. Bove told CNBC: “A true default by the United States Treasury would wipe out bank equity. All bank lending to the private sector in the United States would stop immediately.”

U.S. Rep. Sander Levin, a Michigan Democrat, said any default could send home mortgage costs rocketing by an average of $100 a month, and might endanger the pensions of disabled veterans.

Worse, according to an analysis by Democrats on the House Ways and Means Committee: “If Republicans force default, [millions of] Americans won’t get their Social Security.”

Charles Ballard, an economics professor at Michigan State University, said it‘s all about trust. “Five years ago, with the collapse of Lehman Brothers, we saw what happens to financial markets when there is a major loss of trust — we got the worst recession of our lifetime,” said the author of Michigan’s Economic Future.

But comparing that to a potential default, he added, “is like comparing a minnow to a whale.” The consequences of a default would be, he said, “catastrophic.”

There are those who think the effects wouldn’t be as severe as the analysts are predicting. Not at first, anyway. But if a default occurs, if these scenarios are anywhere near to being reasonably accurate, and if voters blame the GOP for the catastrophe, future Republicans may look back on 1964 as a picnic.

That is, if the party survives.

Jack Lessenberry, a member of the journalism faculty at Wayne State University in Detroit and The Blade’s ombudsman, writes on issues and people in Michigan.

Contact him at: omblade@aol.com