Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Federal Employees won the Government Shutdown

The federal employees won a decisive victory over all politicians in the government shutdown. Hence, the dynamic in American government underwent a paradigm shift both Democratic and Republican politicians will hate.

To explain, the shutdown ended when air traffic controllers at New York’s La Guardia Airport called in sick on the morning of 25 January 2018. Consequently, the sick out disrupted passenger traffic on the East Coast, The Washington Post reports.

That afternoon President Donald J. Trump (R-New York) and congressional leaders made a deal to end the shutdown. In fact, Trump caved in completely and forgot about his Border Wall plans.

How Federal Employees won the Government Shutdown

Clearly, federal employees are the big winners in the government shutdown. In fact, the extent of their victory is so large it is hard to gauge.

Some ways the federal employees won the government shutdown include:

1.    It appears Trump gave federal workers the right to strike.

Essentially, Trump told federal employees it is “okay to walk out if you don’t call it a strike and somebody besides a union does the negotiating.” Therefore, Trump is creating a new paradigm in American politics where elected officials serve as agents for government employees.

Obviously, this could undermine democracy, by forcing members of Congress to choose between voters and government workers. Trump effectively hooked a new sewer to the swamp to increase its pollution.

2.    Moreover, Trump reversed one of the great victories of the Reagan Revolution.

To explain, many historians believe President Ronald Reagan (R-California) changed the paradigm in American labor relations by crushing an air-traffic controller’s strike in 1981. In fact, observers date the great decline of American labor began with that strike.

However, Trump apparently undid Reagan’s action by ending the shutdown, Joseph A. McCartin writes in The Washington Post. In detail, McCartin is a history professor at Georgetown University.

Hence, Trump’s failure in the shutdown could mean the end of the Reagan Revolution. A likely outcome of Trump’s action will be to embolden the labor movement to launch a destructive wave of strikes.

3.    Federal workers are now heroes and victims.

During the shutdown, the news was full of stories about hardworking federal employees standing in line at the food bank. Thus, federal employees will go from faceless bureaucrats to victims in the popular imagination.

Under these circumstances, it will be impossible for Republicans to demonize federal employees as tyrannical bureaucrats. Thus, Trump just killed one of the conservatives’ most effective selling points protecting citizens’ rights from the evil bureaucrat.

The bureaucrat is now a hardworking breadwinner whom it will be impossible to attack. Hence, libertarians and conservatives will need a new playbook.

4.    Shutting down the government is now politically impossible.

Shutting down the federal government is now impossible because of the potential political backlash. Hence, Trump and Senate Republicans have lost one of their most potent weapons.

Instead of shutdowns, it will force politicians to negotiate face-saving deals to keep the government open. Expect, Congress to rewrite budget law to guarantee federal paychecks no matter what happens with the budget.

Notably, U.S. Senator Cory Gardener (R-Colorado) is pushing a bill that separates pay for federal employees from the rest of the budget, The Denver Post reports. In detail, if Gardner’s bill passes federal employees get paid even if there is no budget.

I predict this bill will pass and Trump will sign it. Hence, federal employees just defeated both houses of Congress and the President of the United States with a simple sick out.

Politicians lost the government shutdown

Not only did federal employees win the government shutdown, but politicians lost big time.

Yes, U.S. Speaker of the House Nancy Pelosi (D-California) and Senate Majority Leader Mitch McConnell (R-Kentucky) won tactical victories. However, the victories were so costly the two just lost the war.

To explain, in a tactical victory one side loses the battle but yields no ground and makes no concessions. Consequently, a tactical victory forces the other side to consider quitting the war.

A classic example of a tactical victory was the Vietnam War. The Communists won by not giving into tremendous American pressure. Eventually, the Americans got sick and tired of fighting and went home even though U.S. forces won all their battles.

However, history teaches tactical victories are costly. For example, the Communists won the Vietnam War in 1975 but just 14 years later lost the Cold War.

Both Democrats and Republicans Lost the Government Shutdown

In depth, Pelosi and McConnell won tactical victories in the shutdown by not giving ground. However, the position of both Congressional leaders is far weaker than it was on 1 December 2018.

Effectively, Pelosi and McConnell saved their jobs by burning down the business. However, it will be a few weeks or months before the two realize they realize they have no office to return to.

Tellingly an NBC News/Wall Street Journal Poll estimates that 72% of Americans think the United States “is on the wrong track.” Under those circumstances, Pelosi, McConnell, and Trump could all lose their jobs in November 2020.

Thus we could see some huge changes in January 2021. For example, a Republican majority in Congress and a Democratic president taking office in two years.

Dangerous Precedents from the Government Shutdown

Additionally, the shutdown set three dangerous precedents that could severely disrupt American government.

First, as I noted above, federal workers now apparently have the right to strike. This right will only work when the public sympathizes with federal workers.

The public sympathy is with the federal workers right now. However, that sympathy will vanish if federal employees strike for more money or vacation time. The heroic public servants will turn into greedy and self-serving bureaucrats in the public eye.

In addition, we could see a wave of disruptive federal employees’ strikes that totally disrupt government, the economy, and the political process. History teaches that such strikes can lead to game-changing political upheavals. For instance, it was strikes that made Maggie Thatcher British Prime Minister and enabled her to dismantle much of the British welfare state in the 1980s.

Are Gifts to federal workers Charity or Bribery?

Second, the news was full of stories about people and companies giving gifts and money to unpaid federal workers.

In particular, PayPal Holdings (NASDAQ: PYPL) offered unpaid federal workers $500 cash advances, Reuters reports. This could be a blatant conflict of interest because PayPal is a federally regulated financial technology company.

How are federal employees supposed to treat PayPal impartially when they remember its generosity? Beyond PayPal, there are scores of federal employees that deal with wealthy criminals each day.

The federal corrections officers who guard wealthy cartel kingpin Joaquín “El Chapo” Guzmán are a perfect example of this dilemma. What happens if a federal corrections officer cannot pay his mortgage because of a shutdown and El Chapo offers to pay it? A few months of a shutdown and the corrections officers could carry the druglord’s bags to his private jet.

Congress or Labor Representatives

Third, Trump has set the dangerous precedent of agreeing to federal employees’ demands as long as Congressional leaders negotiate for them.

This generates a dangerous conflict of interest because the constitution obligates U.S. Representatives and Senators to represent their constituents–not federal employees. However, federal employees’ unions now have a strong incentive to make huge contributions to Congressional campaigns for representation in future strikes.

Notably, members of Congress might treat unions that pay for their campaigns as their constituents. In particular, left-wing Democrats who have difficulty attracting corporate cash will be vulnerable to union pressure.

Is it the End of the American Republic?

“History doesn’t repeat itself but it often rhymes,”–usually attributed to Mark Twain.

Coincidently, I was reading Edward J. Watts’ excellent account of the collapse of the Roman Republic; Mortal Republic, during the shutdown. The similarities between the shutdown news and Watts’ retelling of a familiar history are striking.

Watts, a professor of history at the University of San Diego, reassess the Republic’s fall from a modern American perspective. Importantly, Watts offers three reasons Rome made the paradigm shift from Republic to absolute monarchy.

1.    Economic and structural changes forced average citizens to place private interest ahead of public service.

For instance, Roman legionaries went from citizen soldiers to mercenaries. In fact, Roman soldiers of the late Republic were corporate mercenaries loyal to their generals; who paid them, not to Rome. Watts emphasizes the legionaries made the change to feed their families, not out of greed.

2.    Arrogant politicians violated the laws and customs of the Roman government for abstract principles.

This led to political chaos in which the government could no longer function or meet citizens’ basic needs.

3.    Self-proclaimed “conservatives” violated the laws and democratic values to preserve the status quo at all costs.

In particular, Watts identifies the egomaniacal orator Cicero; and the principled conservative Cato the Younger as destructive figures. Cato, in particular, would take any illegal action to prevent reform. Notably, they named the Washington think tank the Cato Institute; a stronghold of conservativism and neoliberalism, for Cato the Younger.

The consequence of these developments was a society in which individuals put personal interest above patriotic duty. Self-preservation, safety, and personal enrichment became the objectives of most Romans. Thus, Roman citizens abandoned all their principles and supported politicians that best served their personal interests.

Under those circumstances, Rome went from a society based on a shallow ideal of public service to one based on a notion of blatant self-interest. Only future history will show us if America is on the same path.