Econ 101 for the Tea Party

The tea party lacks a basic understanding of how our economy works.

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Our businesses, markets and citizens are breathing sighs of relief. After wasting billions and toying with America's creditworthiness, the so-called tea party has ceased, for the moment, holding our democracy and our economy hostage. Nevertheless, the fringe faction that calls itself by this name has made it abundantly clear that it lacks the character to own up to its folly. This Party of Sore Losers (POSERS, for short) has hacked at the proverbial cherry tree and, learning nothing from young George Washington, has failed to own up. In fact, it is holding the axe behind its back, ready to hack again.

This past month, attention was appropriately focused on the short-term consequences of the government shutdown and the POSERS' game of chicken with sovereign default – default at the national level. This is serious. As Warren Buffett emphasized during the crisis in an interview with Fortune, we've spent hundreds of years building up our credibility; it takes but a moment to ruin it. Worldwide, markets have enormous confidence in our financial integrity and the functioning of our government. To date, the free market believes in America's capacity and commitment to make good on its obligations. Let's keep it that way.

During the Reagan years, it was liberals who thought the world was ending because of mounting federal debt. Eventually the country paid it down. We must do this again, but if we're serious about it, first we need policies that support enterprise and growth. We have come through long wars and a stubborn recession. More of our veterans need employment in the private economy, and more of our businesses need to be able to hire and to invest in innovation again.

It is under such conditions that the Party of Sore Losers thought it would play with default at the national level. This shows a blatant disregard for growth and what growth means to our nation. In their zeal, they have put the economic cart before the horse. It's as if they truly don't understand that the horse – private enterprise and the growth and employment it generates – pulls the cart.

[See a collection of political cartoons on the economy.]

Much has been written in recent weeks about what the shutdown cost the nation and what a default would have cost. If the brinksmanship that brought us there were only a one-time tactic, it would have been bad enough. As it is, this tactic was merely the latest instance in a consistent pattern of fixation on cuts and obstruction, to the exclusion of growth. If you were out of a job, would it do you much good to stop showering, doing the laundry or paying rent and utilities, all in an effort to cut expenses? It would bring your costs down, to be sure. But it wouldn't help you get a job.

As vivid as this analogy might be, it makes the point. POSER policies block investment in infrastructure, financial transparency, food safety, pollution controls and education. These are our Internet, our shower, our breakfast, laundry and rent; these fundamentals provide the stable conditions we need to get back to work. Investment in them is something business owners repay many times over. When a stable and functioning government does its job, we entrepreneurs can do ours: creating value and hiring people without unnecessary hindrance.

There are significant dangers when the government starts doing what private industry does best. Think of the last time you were in line at a government agency, and of the level of customer service you received, compared to what you got from a company that would lose you as a customer if it did a bad job. You can vote your representatives out, but the staff at your local government agency isn't typically up for re-election.

[See a collection of political cartoons on the budget and deficit.]

There are, of course, many dedicated civil servants who give you their very best. Still, overall, beware the performer playing to a captive audience. Private companies that succeed in locking you in as a customer only underscore the point. Think of the last time you were on hold with, or tried to use the latest software from, a business with which you as a customer were more or less stuck. When a company becomes the only game in town, or seduces you into signing that contract, a certain disdain for your needs often follows.

The POSERS who call themselves the tea party appear to be seized by a great fear that we will all be waiting in line at government health clinics. The trouble is that they're forcing their version of free choice down our throats. It can be hard to see the irony in this when you're convinced that you're channeling the will of the people. In an interview in Business Insider just days before the recent debt-ceiling deadline, POSER Rep. Ted Yoho claimed to know what "the people" wanted. He broke it down for the rest of us: "They have chosen not to fund the government."

How did we get to this point? Did the POSERS get so good at dismissing their perceived political opponents on ideological grounds that they started to hear nothing but their own voices? Was it the hay this faction made by obstructing government, while screaming that the president was a socialist, that allowed its arguments to become divorced from what a functioning market economy is?

[See a collection of political cartoons on the Republican Party.]

However they talked themselves into it, the POSERS have demonstrated their readiness to play havoc with the most basic needs of the business owner in America. They have shown their disregard for what it means to carry on our work with some confidence that government will do its job, while we do ours. What's so tragic about this, among other things, is that it discredits legitimate efforts to keep government out of places it shouldn't be.

In view of what the POSERS have put us through of late, Americans of all mainstream political persuasions should be on guard. The so-called tea party may pose the greatest threat to free enterprise in decades. The POSERS would block moves to reestablish the financial transparency on which savers and investors rely. They would make us pay the costs of other people's pollution. They would restrict the economic opportunity for immigrants on which this country's success is based. And they would rob us of our right to enjoy or to suffer from that which we have chosen for ourselves in free elections.

Whether "Obamacare" turns out to hurt businesses and employees more than it helps them, we're going to find out in practice. Far more threatening to private industry is the way the POSERS would cut off our economy's nose to spite its face. One can only assume they earnestly believe themselves to be in a mortal struggle to keep government from interfering with our choices. In reality, of course, POSER economic policies limit those choices, in the ways I've described.

Moreover, these policies function to keep the private economy small and constrain recovery and growth, thereby perversely increasing our dependence on debt spending. We badly need to teach these ideologues the basics of cash flows, debt and investment, value generation and growth. Alas, the Party of Sore Losers has been busy teaching the rest of us a course of its own design. The textbook is titled, "Converting Resilient American Innovation into Entirely Unnecessary, Government-Induced Economic Paralysis (A Sore Loser's Approach: 2013 Edition)."

Alejandro Crawford is a senior consultant at Acceleration Group, where he develops strategy for leaders seeking to commercialize innovation and master change. He also teaches courses in entrepreneurship and growth strategy. He graduated from the Tuck School of Business in 2003.

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