Early in her seminal book The Shock Doctrine, Naomi Klein quotes influential right-wing economist Milton Friedman as saying, “Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. . . . The politically impossible becomes politically inevitable.”
Friedman’s quote helps to explain the success of what Klein calls “disaster capitalism,” which she defines as “orchestrated raids on the public sphere in the wake of catastrophic events, combined with the treatment of disasters as exciting market opportunities.”
Most of the examples of disaster capitalism in The Shock Doctrine, first published in 2007, focus on crises in poorer countries, often violently manufactured by the US government or American corporations. Klein also examines in great detail how the Bush administration used the wars in Afghanistan and Iraq to privatize core functions of government and, more or less, create a new and lucrative “national security industry.”
Klein reports on dozens of examples of coups, natural disasters, wars, and other “shocks” that led to successful right-wing efforts to cut pensions, raise prices, smash unions and workers’ rights, cut funding for (or nearly eliminate) public schools, lay off public employees, funnel public money to private companies with little or no oversight, privatize natural resources, and achieve a host of other conservative policy goals. Crucially, while shocks are often acts of violence, violence is not necessarily required. Shocks just need to represent a major disruption to the economic status quo and take a large part of the population by surprise in their unexpected timing, their magnitude, or both.
Though The Shock Doctrine does not focus primarily on US domestic affairs, the patterns of shock Klein reported look suspiciously like House Republicans’ strategy when it comes to raising the debt ceiling. They say they won’t make a deal to let the government borrow more unless Democrats agree to unspecified cuts to social spending. But what if Republicans don’t want a deal at all? What if they want to create a shock?
The debt ceiling is normally a dull topic, and many have understandably neglected to follow along. To recap, the debt ceiling is the artificial cap Congress places on the amount of money the government can borrow. As Secretary of the Treasury Janet Yellen and others have pointed out, there is little practical reason for the debt ceiling to exist at all. From a technical point of view, it is a formality to authorize the Treasury to pay bills the government has already incurred. Through creative accounting, the Treasury can keep paying for a few more months, and then it will have to stop unless Congress votes to raise the debt ceiling.
All sides agree that the US government deliberately defaulting on debts would be the financial equivalent of an atom bomb, causing immediate painful shocks across the world economy and unpredictable long-term effects. In order to avoid this scenario, voting to raise the debt ceiling is usually a matter of course — though the number of near and actual government shutdowns from Congress playing chicken with the ceiling have increased in recent decades.
But it might be different this time. As Politico reported last week, a number of former government officials who negotiated during previous standoffs over the debt ceiling think there’s much less room for a negotiated settlement this year.
The main reason is that, at least on the surface, House Speaker Kevin McCarthy is in a weak position, effectively held hostage by conditions that were imposed on him by the most extreme members of the House Republican conference during his election to speaker. Those conditions specifically require significant spending cuts in exchange for raising the debt ceiling.
Biden and congressional Democrats have rightly called those conditions unacceptable, arguing that spending cuts, if they agree to them at all, should be part of the normal annual budget process. Add to this the fact that there is little evidence that McCarthy can get enough Republicans to agree to a deal — and, given the debacle of his election, there is a lot of evidence that he can’t.
Democrats also argue that though Republicans insist on reducing spending, they have refused to make specific demands for what they want cut. Here is where The Shock Doctrine might provide a hint of what’s to come. The idea of privatizing Social Security has been “lying around” since George W. Bush’s presidency. Joe Biden himself has a long, well-documented history of trying to cut Social Security and Medicare, though in public statements since 2020 he has consistently said he would not agree to do so.
Kevin McCarthy and other Republicans have repeatedly floated the idea of cutting the popular programs over the past year. While McCarthy appeared to abruptly back off the idea of cutting Social Security and Medicare as part of the debt ceiling negotiations on Sunday, his ambiguous promise to “strengthen” the programs without specifying what that means leaves plenty of room for privatization.
Did McCarthy really have a sudden change of heart? And supposing he did, given his precarious hold on leadership, does it matter? Maybe a more likely explanation is that Republicans have realized that the time to push for deeply unpopular policies is when they have the maximum amount of leverage — when the economy is in a state of shock.
A default would not only send financial markets reeling. It would also disrupt day-to-day life for the entire country as basic services stopped. Most acutely, tens of millions of elderly and disabled people who rely on Social Security would see their incomes slashed; hospitals that rely on government Medicare and Medicaid payments could struggle to stay open. There would be real misery and death on a mass scale. In that situation, it’s anyone’s guess how long Joe Biden and congressional Democrats would be willing to hold out — especially as, regardless of who caused the chaos, millions of voters would merely observe that it was happening under Biden’s watch.
It is impossible to say for sure that will happen. One of the key elements of disaster capitalism is that the response to shocks are planned in secret without public input. Even if Social Security and Medicare avoid the chopping block this time, the fact that Republicans are tying their demands for cuts to the critical debt ceiling vote suggest that the concessions will be more painful than the ones Republicans could extract without manufacturing a crisis. It isn’t going to be pretty. Don’t be shocked.