Wed, Dec 05, 2012 - Page 9 News List

Republican obstinacy may force the US into recession

As the US economy moves closer to the edge of the ‘fiscal cliff,’ partisan bickering is increasing chances that a compromise will not be reached before the country dips into another recession

By J. Bradford DeLong

This view clearly influences Republican office-holders, who fear the partisan beast that mans their campaigns’ phone banks and holds the purse strings. Moreover, ever since Clinton’s election in 1992, those at the head of the Republican Party have believed that creating gridlock whenever a Democrat is in the White House, and thus demonstrating the government’s incapacity to act, is their best path to electoral success.

That was the Republicans’ calculation from last year to this year and last month’s election did not change the balance of power anywhere in the US government: Obama remains president, the Republicans remain in control of the US House of Representatives and the Democrats control the US Senate.

Now, it is possible that Republican legislators may rebel against their leaders, saying that they ran for office to govern, not to paralyze the government in the hope that doing so will give the party power to reign as it wishes after the next election. It is possible that Republican leaders like representatives John Boehner and Eric Cantor, and Senator Mitch McConnell, will conclude that their policy of obstruction has been a failure.

They might note that, although the economy remains deeply troubled and depressed in the aftermath of a financial crisis for which they set the stage, Obama’s policies have been by far the most successful of those in any major advanced country and conclude that he has been a relatively good president, and one worth supporting.

However, do not count on it. Right now, every senior politician in the US is telling their favorites in the press that they are confident that compromise on the “fiscal cliff” will be reached before the end of this month. Yet they are telling their favorites this because they think that pessimism now will lead to their being blamed for gridlock later.

It seems to me that the odds are about 60 percent that real negotiation will not begin until tax rates go up on Jan. 1. It also seems that, if gridlock continues into next year, the odds are also 60 percent that it will tip the US back into recession. Let us hope that it will be short and shallow.

J. Bradford DeLong was a former US Treasury deputy assistant secretary, and is a professor of economics at the University of California, Berkeley, and a research associate at the National Bureau for Economic Research.

Copyright: Project Syndicate

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