Slower Job Growth Could Spell Enormous Trouble for the GOP

We know now that the Great Shutdown of 2013 has been a catastrophe for the GOP.  It caused historic levels of across the board brand damage.  It prevented the GOP from drawing attention to the early, probably soon-to-be-fixed problems with the fall rollout of the ACA’s insurance exchanges.   And perhaps what is most perilous for the GOP, it puts the Party in grave danger of being blamed for an economic slowdown if one comes this fall and winter, something the new disappointing jobs report out today made a bit more likely. 
 
This last point could have a major impact on budget negotiations this fall, and again next year.  If the economic damage caused by the shutdown comes to be seen as event triggering slower growth, or even a mild recession, the GOP will be blamed.  Adding job loss and a slow down to the already decimated Republican brand could very well be enough to cause the House to go Democrat in 2014, while also creating even more lasting brand challenges. 

Thus, the Republican Party now has a major incentive, for arguably the first time in the Obama Presidency, to pursue policies that create immediate growth.  From a classical economic standpoint, this means taking threats of default and government shutdowns off the table to reduce “uncertainty;” avoiding large spending cuts which take money out of the economy and cause further job loss; and looking at, dare I say it, short term stimulus to prevent further slippage.   This path, of course, means abandoning their current party-wide obsession with spending cuts. 
 
Assuming that the Republican leadership is reading these events as I am, this new political landscape dramatically weakens the GOP’s negotiating position going into the current budget talks, making the final product likely to look a lot more like the Obama than the Ryan budget.  Of course, an agreement on such a budget would trigger a brutal internal budget fight between the GOP pragmatists and the Tea Party government cutting absolutists, causing even greater friction inside an already battered GOP (recognizing that it was internal tension over the budget which caused the govt shutdown in the first place). 
 
For Democrats, this new landscape offers two very important opportunities outside of prevailing in the coming budget talks.  First, it allows the Party to do lasting damage to the fallacious and damaging theological argument undergirding much of the radical right’s current economic approach – that reducing government spending is a necessary pre-condition for growth.    Weakening this argument in the public domain will not just weaken the power of the Republicans in Washington, but allow better and more appropriate economic policies in future years. 
 
Second, it forces the system to look for deficit reduction measures in other places other than through contractionary economic policy.    The best idea hanging out there right now, one that the CBO says will add 3-5% to GDP and reduce the deficit by almost a trillion dollars over the next 20 years, is the recently introduced House version of the Senate immigration reform bill.   The current landscape may indeed make the passing of a good immigration reform bill more likely now. 

Of course, Congressional Republicans may not see the current landscape this way.   They have been far too prone to ideologically-driven delusions this year.  But if the economy slows now, it will be hard to escape the conclusion that the reckless and highly unpopular pursuits of the GOP these last few weeks got us there.   And adding the prospect of a GOP-induced economic slowdown to the already devastated brand may force a degree of pragmatism into the GOP that would be welcome by all Americans. 

Update - For more on the potential economic impact of the GOP's brinksmanship, see this excellent new analysis by Rob Shapiro.