GOP: From shutdown villains to kings of Congress?

In October 2013, the Republican Party hit the lowest approval rate in its history. Most Americans blamed the GOP for the 16-day government shutdown after a prolonged and heated debate over the Affordable Care Act’s implementation.

“Republicans are no longer the party of business,” Bloomberg Businessweek proclaimed. Liberal publications such as The New Yorker and Rolling Stone agreed with the conservative New York Post that the Republicans had committed political suicide.

One year later, Republicans are set to win the biggest majority ever in the House of Representatives and, more important, take back the Senate in Tuesday’s midterm elections. So what happened?

“The biggest lesson for the moment is that Americans have a short memory,” said Stan Collender, a budget expert and vice president at communications firm Qorvis MSLGroup.

Although the U.S. economy grew more than expected in the third quarter, the fruits of the recovery aren’t being shared equally. Ninety-five percent of the wealth gained since the recession has been earned by the wealthiest 1 percent. There are 9.3 million jobless in the United States, up from 7.6 million before the recession. Over 3 million have been unemployed for 27 weeks or more, and most of the jobs gained since 2012 are low-paying ones, with real wages declining. A recent survey by the National Association for Business Economics found wage raises are getting even rarer, even as growth picks up steam.

Overall, last year’s government shutdown cost the economy an estimated $24 billion. Along with the deal that ended it was a series of annual cuts — known as the sequestration — that would ensue for nine consecutive years, adding up to $1.2 trillion. Still, most experts believe the U.S.’ problems run deeper than mere belt tightening.

“I wouldn’t say that the government shutdown is a major reason why the economy is struggling in 2014,” said economist Mike Konczal, a fellow with the Roosevelt Institute. “Austerity, on the other hand, I think is very important.”

He defined austerity as the cutting of government spending at a time when the economy is not at full employment, and he dated the beginning of this U.S. austerity regimen to 2010.

The U.S. has been slashing public funds at state, local and federal levels since then. The education, housing and defense budgets have experienced dramatic drops, with allocations to food stamps and other subsidies also being reduced. As a result of these cuts, a record low of 28 percent of jobless Americans now receive unemployment benefits, and the country’s infrastructure investment has plummeted.

Konczal said there are dire long-term issues, such as high economy-wide health care costs that the country must face. But he also thinks an economic crisis is the worst time to do that.

“Every dollar that’s not spent doesn’t go through the economy in a way that increases economic activity,” he said. “And that’s what we are seeing right now. It’s a stimulus in reverse, so we are cutting, and it’s making things much worse.”

Throughout this decade, the United States, like most other Western countries, has been debating what to do with its continued budget deficits and the resulting sovereign debt increases. The debate was obscured by the recession, which drastically reduced tax receipts and, coinciding with the $29 trillion bank bailout and different stimulus programs, caused total U.S. national debt to peak at about three-quarters of GDP. It was in this climate of angst about the debt that the sequestration debate and government shutdown happened in October 2013. 

Thanks to rising tax receipts in the recovery, the annual deficit has now stabilized at 2.8 percent of GDP, below the 40-year average. With GDP growing faster than the deficit, the debt ratio is expected to go down further. However, many remain worried about the state of U.S. finances.

“Washington’s spending is out of control,” said Republican National Committee spokeswoman Kirsten Kukowski. “Under President Obama and Harry Reid’s leadership, we are spending money we don’t have.”

To Mark Blyth, author of “Austerity: The History of a Dangerous Idea,” such concerns are unfounded. “It’s utter nonsense. Even in the midst of the financial crisis, which started in the United States, every country in the world wanted to hold dollars,” he said, questioning whether the U.S., which mints the world’s dominant reserve currency, is at any risk of amassing too much debt. “Just like a French politician saying something bad about the United States, it’s a political tool for Republicans.”

Blyth, a political scientist at Brown University, added that Republican debt and deficit arguments play into class politics. “They defend the interests of the people who have money, and they basically say to them, 'You shouldn’t pay any taxes to support anybody else,' and it’s used for that end.”

If framing the debate around fiscal austerity is a political strategy, it sure is working.

Armed with a simple message about balanced, austere budgets, smaller government and reduced public spending, Republicans appear ready to defeat Democratic incumbent senators from Arkansas to West Virginia and retain most of their seats to secure a majority in the Senate. And what are Democrats offering as an alternative to austerity?

Not enough, argues Konczal.

“Even though we have no deficit problem, even though we have an unemployment crisis, Democrats are just not talking the language of full employment, like FDR, Lyndon Johnson or even [Richard] Nixon did.”

Few states in the union have endured a harsher few years economically than Kentucky. Already one of the poorest in the nation, the Bluegrass State suffered great job losses with the recession, from which it has barely recovered.

The race between Republican Mitch McConnell, the Senate minority leader, and Democratic challenger Alison Lundergan Grimes has been the most expensive in terms of candidate spending and one of the most contested and controversial ones. The national political bigwigs of both parties have made great efforts, with Bill and Hillary Clinton offering cameo appearances in the last week of the campaign.

But when it comes to substantive differences in the campaigns’ economic agendas, there aren’t that many, argues Timothy Weaver, political scientist at the University of Louisville.

“They’re both neoliberals, really,” he said. “One of them is a sort of neoliberal-lite candidate, who says, 'We’ll do a little bit to increase the minimum wage, but we want to reduce the deficit and reduce regulation on business.’ And the other one says, ‘We don’t want to do anything about the minimum wage, and we want to reduce the deficit and reduce regulation on business.’ It’s sort of austerity lite versus austerity heavy. Neither of them sees a role for the government in increasing, through deficit spending, stimulus in the economy.”

In fact, Grimes has supported a constitutional amendment that would require the U.S. government to keep a balanced budget.

The fact that Democrats have embraced balanced budgets should come as no surprise, argues Wisconsin Democratic pollster Paul Maslin. After all, he points out, it was Bill Clinton who declared the era of Big Government was over.

However, even proponents of balanced budgets and fiscal responsibility are aware of the limitations of the concept. “There are two four-letter words,” said Steve Bell, a self-described deficit hawk at the Bipartisan Policy Center. “One is jobs, and the other one is debt. Jobs always wins the debate.”

Having served as a staff director of the Senate Budget Committee, Bell concedes that the deficit doesn’t rank highly as an issue in the midterm campaigns. But he explains that when he ran Republican Senate campaigns in the 1980s, it was never necessary to mention the term. “We knew that those who cared about it would vote for us anyway,” he said.

Veteran pollster John Zogby paints a similar picture nationally, with Democrats struggling to present an alternative to austerity for fear of alienating conservative and independent voters.

“Young people are worried about debt, but young people want jobs. African-Americans and Latinos — these are groups that are not opposed to spending, and they could produce Democratic victories,” Zogby said. “By either opting for austerity or at least not opposing [it] vocally, what you’re doing is you’re not energizing an important part of your base.”

Bell, who recalls the two shutdowns in the mid-1990s, doesn’t anticipate much trouble when the suspension on the debt ceiling expires in March 2015 and the government can’t borrow anymore. With the deficit down and a presidential election around the corner, he shrugged off the possibility of Republicans’ forcing another shutdown.

“The days of debt drama,” he said, “are behind us for a while.”