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Government shutdowns are not a new thing.  Gary Evans over at Global Macro Monitor recently provided an effective short summary with this graph.




It is interesting to observe that the government shut down 8 times under President’s Reagan’s watch.  One reason for that was a strategy embraced by the Republicans at the time that came to be called Starve the Beast.  Essentially the Republicans advocated large tax cuts, always popular, knowing they would lead to large government deficits.  The hope was that the deficits would force the Democrats to cut programs they care about, social and environmental and so forth while keeping in place programs favored by the Republicans especially funding the military.

The strategy worked to an extent but it did lead to a number of government shutdowns.  Mercifully they were short and our government leaders on both sides rallied to the best interests of America by engaging in serious and honest negotiations.

Fast forward to President Obama.  The Starve the Beast had morphed by then into The Party of No born from the Tea Party obsession with everything Obama.  The new Republican strategy, hostage to the Tea Party, became opposing anything Obama proposed.  This has been well documented by Michael Grunwald among others.

TIME just published “The Party of No,” an article adapted from my new book, The New New Deal: The Hidden Story of Change in the Obama Era.  It reveals some of my reporting on the Republican plot to obstruct President Obama before he even took office, including secret meetings led by House GOP whip Eric Cantor (in December 2008) and Senate minority leader Mitch McConnell (in early January 2009) in which they laid out their daring (though cynical and political) no-honeymoon strategy of all-out resistance to a popular President-elect during an economic emergency. “If he was for it,” former Ohio Senator George Voinovich explained, “we had to be against it.”

The Party of No led to the 2013 shutdown (the only government shutdown under President Obama).  Former Federal Reserve Chairman, Alan Greenspan had this to say at the time.

“Our highest priority going forward is to fix our broken political system. Short of that, there is no viable long-term solution to our badly warped economy. In America we are being pulled apart politically in ways unrivaled since the aftermath of the 1929 crash. … My first realization of a striking shift in our politics was brought to my attention by the staunch conservative three-term senator from Utah, Robert Bennett. He feared that despite his strong approval ratings, his 2010 reelection bid was by no means secure. In his 2004 reelection, Bennett won 69 percent of the vote. His problem, as he stated it, was unexpected contenders for his Senate seat from his political RIGHT. [The 18-year veteran finished third at the Utah Republican convention and his seat is now held by Sen. Mike Lee, an instigator of the effort to shut down the government over Obamacare.] It was my first awareness of what later came to be known as the Tea Party, a political movement that emerged in 2009 and became a powerful force in the 2010 election. …

We are now in the midst of another government shutdown, a catfight among our elected politicians.  The “blame game” has begun.  It will lead nowhere.  The extremists on both sides will not be convinced to change their opinions.  We have deep divides in America that are difficult to bridge.  We need real leaders who can find a way back to reason, moderation, principled negotiation and who can focus on those areas where a majority of Americans do agree.  After all, America has always been described as a great country, a big tent, a city on a hill and Americans have mostly rallied to great causes when needed.  Is this possible?  I hope so.  If not, we are doomed.

In the meantime the economy and the stock market with it has been steadily recovering since the 2008 crisis.  The progress over the past year is nothing new but the stock rally is becoming worrisome to many including Think in the Morning who thinks a bubble is brewing.  When the bubble pops everything will change.  And not for the better.  As George Santayana warned years ago, “those who cannot remember the past are doomed to repeat it.”  It has been said that “eternal vigilance is the price of liberty.”  It is also the price of personal solvency.  Beware.