The standoff of a century is currently taking place in Washington, DC right now (even though the century is only 11 years old). If Congress can’t come to a spending agreement by Friday, the government will shut down for the first time since 1995. This moment has been staved off the past couple of months through continuing resolutions and stopgap measures that pay to keep government operating, but they’re temporary solutions that merely kick the can down the road. Now it appears we’re at the end of the road, and the clock has run out on Congress. We’re down to two options: get a long-term spending bill finalized, or shut down the government.
First let’s look at Option A: a long-term spending bill. With the arrival of the Tea Party in Washington, the attitude towards spending and budgets has changed dramatically, and it’s for the better. Rather than discussing how much will be spent and where it will be spent, the focus is now what to cut and by how much. It’s a welcome breath of fresh air, but it comes with the same old arguments. Both parties have proposed bills that cut spending, but in different amounts. Democrats, feeling the pressure of mounting deficits for the first time in two and a half years, proposed $33 billion in cuts, whereas Republicans, pressured by the Tea Party-backed members of Congress, are thinking more towards $40 billion at this stage of the game, according to Speaker John Boehner. While on paper these cuts seem pretty hefty, they barely make a dent in the nearly $1.3 trillion deficit. If one does the math, $33 billion in cut spending would represent, at most, a 2.6% reduction in the budget. $40 billion in cuts would be better, but still only roughly 3.1% of the budget. It’s a start, but such miniscule cuts will not do much in the long run to get our country back in fiscal order.
On the budgeting side, House Budget Committee chairman Paul Ryan just announced the GOP budget for the upcoming fiscal year. In it, he claims spending would be reduced by $6.3 trillion over ten years, while adding one million net jobs next year. The savings would come from a reorganization of Medicare and Medicaid, which would turn these programs into a system of insurance premium payments that would allow seniors on Medicare more flexibility in choosing their health care providers in the open market, as well as helping poor people pick better plans for themselves as well. The bill would also defund ObamaCare, lower the corporate the tax rate to 25% while closing major tax loopholes and government giveaways à la General Electric, and make cuts in defense spending. The budget has been widely praised by budget experts from both parties (Alice Rivlin, a Democrat budget analyst from the non-partisan Brookings Institute, was Ryan’s key partner in crafting the budget). These proposals would cut the deficit in half as well as bring unemployment down to 4% by 2015. Democrats were quick to skewer this bill as taking food out of seniors mouths (Nancy Pelosi’s claim), and leaving the poor at the “mercy” of the private health insurance industry, but it’s just their same old schtick they’ve been playing for the last four months: cut spending, but don’t cut that spending. Sadly, the Senate Democrats, who hold a majority, won’t pass the budget without changes, but it does serve notice that the GOP is keeping its pledge to cut government spending and is serious about getting rid of the deficit while creating jobs and making America a more business friendly environment for corporations. It’s an ambitious and risky budget proposal, but given the financial state our country is in, ambition is sorely needed.
If both sides can’t agree on a budget, then we are faced with Option B: a government shut-down. Regardless of what some will have you believe, the “shut down” is not a complete shut-down. Essential services like entitlement checks and unemployment insurance will still be sent out, and you will still get your mail. Also, passports and document processing will still occur, though at a slower rate. However, national parks and DC museums like the Smithsonian would close, and federal funding for state programs would end, meaning states would have a lot less to work with for a period of time. Federal employees may also be furloughed, and non-essential military personnel might be working without pay. The IRS would close as well, so tax refund checks won’t go out (hold the hallelujah). Strangely enough, this prospect intrigues me. States would now have to run without many federal funds, so governors and legislators could act more independently of federal whims. This would mean a sink-or-swim situation for supposedly conservative state officials, and seeing how they react to the situation will tell us who is committed to more state sovereignty, or is just another big government suck up.
Probably the worst aspect of a government shutdown though would be the non-stop finger-pointing we’d hear on the television during the shutdown period. Be prepared for all day tit-for-tat blame fests between Democrats and Republicans over who caused the shutdown. As it stands right now, Democrats might be on the hook for the shutdown more than the GOP. I’m not saying that to point fingers, but rather an analysis regarding facts. Spending proposals have flown out of the House this session due to an unexpectedly united House GOP, but Senate Democrats have shot them down once they reached the upper chamber. Also, Democrats have been shaky regarding cuts to entitlement programs and education funding, which are both due for serious spending reforms. Democrats, to their credit, are beginning to see the need for cuts, and are starting to talk to the Republicans on this issue, but their numbers are still too small to make any real impact, and much of the “cut” spending comes from the transfer of domestic spending to mandatory spending, which can’t be cut unless a law is changed. However, Democratic leaders will still spin the story to make it seem like the GOP is making unreasonable spending demands and robbing Joe Smith of Somewhere, USA of his health care or government-funded job. It’s the same tired attacks that nobody subscribes to anymore, and that Democrats continue to use for the purposes of grandstanding and electioneering.
The two sides continue to talk, and budget debates are occurring as they should. This might be the moment when a long-term spending bill aiming at the staggering deficit goes to the President for his signature. We might even see a budget for the first time in nearly two years. We might finally see unemployment numbers decreasing at a much faster rate as more businesses hire without unnecessary red tape and confusing tax codes weighing them down.
Or Congress just keeps kicking the can down the road.