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Government Shutdown Risk is Real As Republican Minority ‘Blackmails’ the House: Holtz-Eakin

Daily Ticker

Here we go again.

Another big budget battle is brewing on Capitol Hill and the possibility of another shutdown of the federal government becomes more real every day. Republicans are threatening to stop funding the government–by not raising the debt limit–if they can’t simultaneously defund Obamacare. Congressional Democrats and the White House are refusing to make that deal.

Treasury Secretary Jacob Lew said Tuesday, “There are not and will not be negotiations about the debt limit” and the White House budget office Wednesday directed federal agencies to prepare for a potential government shutdown. President Obama, speaking before the Business Roundtable on Wednesday, accused a “faction” of House Republicans of using the debt ceiling threat to “extort a president” and “governing party.”

Related: Congress Will Play a "Game of Political Chicken" Over Debt Ceiling & Budget: Knox

“There’s a real risk of a government shutdown,” Douglas Holtz-Eakin, president of American Action Forum, a center-right policy institute. “A minority of Republicans in the House is trying to blackmail a majority into doing something they don’t want. It won’t work.” The former director of the Congressional Budget Office under President George W. Bush says the strategy will not only fail politically but could cause harm.

Related: U.S. Deficit Falls Faster Than Expected

"People have misinterpreted the lessons of the 1990s,” says Holtz-Eakin, referring to the last government shutdown in late 1995 and early 1996. Republicans didn’t come out ahead politically and Congress “actually funded the Department of Defense and shut down the rest. What would happen this time is the troops would be in harms way and would not get paid.”

The Republican-controlled House could vote as early as Friday on a stop-gap funding measure – also known as a continuing resolution – that stops funding for the health care law, which the Democratic Senate is expected to reject. Then comes the vote on raising the debt limit which is expected to expire in mid-October.

Related: Obamacare Delay Will Prove "Jobs Killer“ Label was Trumped Up: Dean Baker

"We should fund the government. We should raise the debt limit,” says Holtz-Eakin. “Those are economic no-brainers in my view.” Longer term, however, Holtz-Eakin says the government has to deal with its swelling deficits and debt load. The CBO Tuesday released a report showing that the annual deficit will fall to 2.1% of GDP in 2015 but then begin to grow. By 2038, the CBO projects that the total debt burden— the accumulation of all those deficits—will swell to at least 100% of GDP from 73% currently. That's already almost double the rate over the previous 40 years.

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