I’ve had a couple of people ask me this afternoon and evening why I think the stock market is up despite the government shutdown. I would say the stock market is up because of the government shutdown. From the getgo I’ve said that taking the lurking element of obstinacy in the House GOP caucus as a given, a government shutdown is a good sign for the economy.
The practical alternative to a shutdown, you should recall, was a short-term (i.e., one or two months) continuing resolution that would have set up a fight over the debt ceiling.
The shutdown by no means makes a debt ceiling breach impossible. But it does make it less likely. It makes it less likely because it’s teaching Republicans that a strategy of trying to make the American people suffer in order to force Democrats to make concessions on health care policy doesn’t work very well. It’s actually a bit nutty. So nutty that the 30 or 50 or 75 or 100 most conservative House members can’t hold to it? Of course not! But probably too nutty for the 20-50 House members from the least conservative districts to hold to. Cleaving those 20-50 members from the rest of the party is the key to avoiding a debt ceiling disaster, and the shutdown is producing an object lesson in the need to cleave.
Should what we saw today make us complacent about the debt ceiling? No. But if today’s events had been avoided with a last-minute short-term continuing resolution we’d be in even worse shape.