December 19, 2017 / 3:35 PM / a year ago

Breakingviews - U.S. political doomsday will hurt economic growth

A U.S. flag flies at half-staff under gray skies at the nation's Capitol for the arrival of Senator Frank Lautenberg's coffin, which shall to lie in repose, in Washington June 6, 2013. REUTERS/Gary Cameron

WASHINGTON (Reuters Breakingviews) - A political doomsday is approaching in the United States. Republican and Democratic parties will splinter ahead of the 2018 midterm election, marginalizing moderates. More firebrand politicians increases the chances of government shutdowns, a U.S. debt default and trade wars. The economy would be collateral damage.

Turmoil is growing inside both major U.S. political parties. On the Republican side, former White House chief strategist Stephen Bannon is backing congressional candidates who defy the establishment, like Roy Moore, the former Alabama judge accused of sexual harassment. Moore lost a special Senate election in mid-December, in a stunning upset for the GOP. Bannon has also called for the resignation of GOP Senate Majority Leader Mitch McConnell.

Democrats are not immune. Senator Elizabeth Warren recently said the 2016 presidential primary was rigged against socialist Bernie Sanders in favor of Hillary Clinton. Senator Dianne Feinstein was booed at a San Francisco event for saying President Donald Trump could be a good leader if he changed. A few months later, she drew a primary challenge from a more liberal candidate.

In November and December, left-wing congressional Democrats were pushing for a government shutdown if Republicans failed to help young illegal immigrants who faced deportation under Trump. In 2013, the tables were turned when conservative Republicans forced a 16-day shutdown and put the country at risk of defaulting on its debt over the Obamacare repeal fight. Extremists on both sides also want to scrap trade deals like the North American Free Trade Agreement after successfully pushing for the U.S. pullout from the Trans-Pacific Partnership.

Moderates, meanwhile, are fleeing politics or are under threat of ejection. About two dozen House Republicans have announced they will not run for re-election. Many are centrists from districts that Trump narrowly won, like Dave Trott in suburban Michigan.

Six moderate Democratic senators face tough re-election bids in states that Trump won in 2016. Five of them, including Joe Donnelly of Indiana, co-sponsored a Republican-led bill to raise the threshold for a bank to be considered systemically important from $50 billion to $250 billion. It was a rare moment of bipartisanship.

Those kinds of moments could disappear altogether with many 2018 candidates running to blow up the system. Many are willing to risk government shutdowns, debt defaults and trade wars to prove their point. There will be few compromisers left to stop them.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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