"Top Conservative: There Will Be No Major Economic Consequences To Shutdown Or Default"
CREDIT: Flickr user Gage Skidmore
ST CHARLES, Missouri — The Chairman of the one of the most influential right-wing organizations in the country suggested there’d be no serious economic harm done by a government shutdown or failure to raise the debt ceiling — despite a consensus among economists to the contrary.
Al Cardenas heads up the American Conservative Union (ACU), which hosts the annual Conservative Political Action Conference (CPAC) and produces an influential system for rating members of Congress’ ideological purity.
Cardenas expressed support for Sens. Mike Lee (R-UT) and Ted Cruz (R-TX)’s campaign to defund Obamacare, even at expense of shutting down the government or failing to raise the debt ceiling. ThinkProgress asked Cardenas what the costs of this strategy might be, and he suggested they’d be non-existent:
BEAUCHAMP: What would the consequences be either, first, of shutting down the government or, second, of potentially defaulting on the U.S. debt during the Obamacare fight?
CARDENAS: Well let’s make sure we keep this in historical perspective. We have shut down the government 17 times in the last 50 years. It sounds like it’s a radical idea and it’s the first time we’re contemplating it. It’s actually happened 17 times in America and nobody’s ever spoken about it in such radical terms as Democrats are. [...] If you hit the mark on October 1st, that doesn’t mean government shuts down. Usually you can pay all the bills for 12 or 13 more days. The only time you go into default is if you don’t pay the interest which is about $18 billion a month. We’ve got plenty of money to pay that. [...]
BEAUCHAMP: So you don’t believe there’d be any major economic consequences for a government shutdown or a default?
CARDENAS: I’m convinced there won’t be.
Cardenas is right that shutdowns have happened in the past, but he’s wrong that they’ve been costless. The two shutdowns during the Clinton Administration cost us 0.5 percent of GDP worth of economic growth, and the costs of a shutdown this year are estimated to be roughly three times that ($240 billion relative to the U.S.’ GDP in 2012). If the shutdown went on for around two months, it could “precipitate another recession.”
A default would, without question, be much worse. Though Cardenas suggested we’d be able to pay interest on the debt and avoid default, that’s flatly untrue: default means failing to pay someone you owe, and failing the debt ceiling would force us to do that. The potential consequences range from “destroy[ing] the market as we know it” to freezing “the central nervous system of the banking system.”
Cardenas is ideologically simpatico with Cruz and Lee and has professional ties with both. Cardenas and Cruz worked together on George W. Bush’s Florida recount legal team and Cardenas’ ACU was a strong supporter of Cruz’s insurgent primary campaign for Senate. Lee came to speak at the Missouri CPAC instead of remaining in DC to navigate the shutdown.
The ACU chairman isn’t the only prominent conservative to deny economic reality of late. Rep. John Fleming (R-LA) told reporters to ignore economists’ warnings about the disastrous consequences of reaching the debt limit.