Skip to main content

Canadians can only pray their economy won’t be collateral damage in war over Obamacare

U.S. President Barack Obama, shown Sept. 6, 2013.

KEVIN LAMARQUE/REUTERS

Politics Insider delivers premium analysis and access to Canada's policymakers and politicians. Visit the Politics Insider homepage for insight available only to subscribers.

The United States government may well shut down next week, and could default on its debt later next month. Yes, you've heard that tune before, but an unhappy confluence of deadlines could force Republicans and Democrats to plunge over first one cliff, and then another.

We are entering one the wildest and woolliest months since Barack Obama became president. And all Canadians can do is watch and pray that our economy doesn't become a drive-by victim of American political recklessness.

Story continues below advertisement

"Policy uncertainty is weighing on the American economy," said Craig Alexander, Chief Economist at TD Bank Group, in an interview. "And the worse these discussions go, the greater is the risk that the fiscal drag intensifies."

And anything that drags down the American economy drags the Canadian economy down with it.

At the root of the latest crisis is the Affordable Care Act, commonly known as Obamacare. Major parts of the Obama administration's signature domestic achievement – which requires all Americans to acquire health insurance and insurers to offer coverage, regardless of pre-existing conditions – comes into effect Oct. 1. The Republicans, who loathe Obamacare above all other things, have vowed to kill the act by defunding it.

As it happens, Oct. 1 is also the beginning of the new fiscal year, and thus far Congress has failed to pass a budget. Instead, the Republican-controlled House of Representatives approved a continuing resolution on Friday that would allow the government to carry on, but that would strip out all funding for Obamacare.

That resolution is now with the Democrat-controlled Senate, which is expected to restore the funding for Obamacare and send the resolution back to the House.

Republican House Speaker John Boehner will then have an impossibly difficult decision to make. His caucus is dominated by fire-breathing conservatives sent to Washington by the militant Tea Party wing of the GOP. Other, less radical, Republican representatives are frightened of angering the Tea Partiers, who have successfully blocked the re-nomination of what they call RINOs (Republicans in Name Only).

Mr. Boehner could defy his own caucus and try to get the continuing resolution passed with the help of Democrats and a few moderate Republicans. Or he could accede to the wishes of the Tea Partiers, in which case Congress would fail to pass a continuing resolution and the United States government would shut down Oct. 1.

Story continues below advertisement

Not entirely, of course. Essential services – border agents, air traffic controllers and the like – would continue. Zoos would close but the animals would be fed. Social Security cheques would be mailed out.

But the routine activities of the federal government would be suspended, and about 800,000 government workers would be laid off.

Something like this happened in 1995 and 1996, when a Republican-dominated Congress led by Speaker Newt Gingrich shut down the government for a few weeks as part of its fight against the Clinton administration. The Republicans lost that fight, which contributed to Bill Clinton's re-election victory in 1996.

The American public might well blame the Republicans for any shutdown this time. But for the Tea Partiers, abolishing the abomination of Obamacare is worth any political price.

"It's all about one party going off the rails," explained Thomas Mann, a senior fellow at the Brookings Institution, a Washington-based think tank.

Temporarily shuttering the U.S. government would be a major inconvenience. But another deadline arrives about two weeks later, in mid-October, when Congress will once again be required to raise the debt ceiling so that the government can continue to borrow.

Story continues below advertisement

The Republicans have used previous debt-ceiling deadlines to force the Obama administration to agree to spending cuts. This time, they're threatening not to approve another raise unless the administration suspends implementation of Obamacare for one year. Mr. Obama has refused even to consider the demand.

If neither side gives, once the debt ceiling is reached the Treasury will no longer be able to pay its bills. The government of the world's largest economy will default on its debt.

"Shutting down the government is one bad thing, but you shut it down, you open it up again," said House Minority Leader Nancy Pelosi. "Not lifting the debt limit is unleashing a torrent, a river of no return. It is beyond cataclysmic."

Which is why Mr. Alexander is certain that, somehow, both sides will find a way to prevent a default from happening.

"Rationality says we know what the outcome will be," he said. Though he acknowledged: "Rationality doesn't always win out."

The greater price, assuming the government does not shut down and the debt ceiling is raised, is in jobs not created and profits not realized as a result of a lack of business confidence in the ability of the federal government to manage its affairs.

Story continues below advertisement

"You can make a fairly convincing argument that policy uncertainty has contributed to a weaker profile for business investment," said Mr. Alexander, "though you would never be able to put a figure on it."

All we do know for sure is that, whatever happens in October, these deadlines will all come around again next year. And the year after that.

John Ibbitson is the chief political writer in the Ottawa bureau.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter