The clock is ticking down on the April 8 deadline to produce a 2011 budget (unlikely) or to kick the can down the road with another continuing resolution that avoids a government shutdown (getting unlikelier by the day.)
As I wrote in my March 14 posting, Playing “Chicken” with the White House, the easy stuff was given up in the first two CRs, and the Democrats are now at a point where serious cuts have to be made if the remaining $51 billion in cuts (a paltry sum in comparison to current spending) demanded by the Republicans are to be made. Keep in mind that there is still no 2011 budget, because the 111th Congress couldn’t get one passed even though it held the almost bullet-proof majority that got ObamaCare passed. Absent a budget, all of the current spending is at the same level as the 2010 budget, and it is the spending at that level ($3.55 trillion, 33% of which was deficit spending) that Congress is now haggling over cutting.
My sense is that Congress has given up hope of agreeing on a 2011 budget and is preparing to focus on the 2012 budget. After all, half of fiscal 2011 has passed so why bother?
In the 25 weeks remaining in the 2011 fiscal year, which ends September 30, the Republicans have so far insisted that the cost of signing on to another CR is $2 billion per week. That is such a small amount of the current average weekly federal spending – $68.3 billion per week – you’d think that waste alone could cough it up. But according to the Democrat Senate caucus, cutting spending by $2 billion per week (less than 3%) is “too extreme” and they cite the immeasurable sacrifice that the Republican meat axe would inflict on education, health research, food inspection and other programs and services.” Wow! I hadn’t realized that our federal government had become so efficient that not even 3% of its expenditures is waste.
A $4 billion spending reduction agreed to by the Democrats on March 4 extended government operations two weeks until March 18, and another $6 billion was found to extend operations three weeks to April 8. The word on the street has it that the Dems will offer another $20 billion in cuts – on top of the $10 billion already conceded – if Boehner and the Tea Party are willing to settle for $30 billion instead of $61 billion. That’s unlikely. At least I hope so.
Now it comes down to who blinks first in the “shut the government down” game. A Rasmussen poll released Friday showed that 57% of “likely voters” thought making deep cuts was more important than avoiding a government shutdown. Only 31% thought keeping the government running was more important. Twelve percent had no opinion.
In a Wall Street Journal op-ed this week, pundit Fred Barnes wrote that the incremental strategy the Republicans have been using is working. Since $2 billion a week was a small spending reduction relative to over $68 billion in average weekly authorized spending, Democrats would have a hard time explaining to the voters why cuts of that magnitude were so unacceptable that they justified shutting down government. After all, Republicans had wrung $10 billion in concessions in two tranches from Senate Democrats and the “budget by the inch” strategy would likely continue to work.
I disagree for two reasons. First, Barnes’ argument is based on logic and logic is not part of the political process – certainly not as politics are practiced in Washington. Emotion fuels the political process because each side has a constituency it must posture for or lose their support and both sides are vying to influence the moderate independent, whose vote will determine who wins in 2012. The Independents and each party’s constituent base are so far apart ideologically that the party leaders have to be almost schizophrenic to placate both.
Second, Barnes assumes that either the Democrats or Republicans will rather cause the government to shut down rather than yield their principled stand for the commonweal. The object of this game, however, is to make demands in full knowledge that the other side will reject them so they are blamed for the government shutdown on their unreasonableness – not as the consequence of a reasonable and principled stand.
There is possibly a third reason why I disagree with Barnes. I think Washington has become so politicized that it is dysfunctional.
That seems to be borne out in the results of another recent Rasmussen survey which came out this week. Just 16% of “likely voters” thought it would be better for the country if most incumbents in Congress were reelected. Just 16%! That’s a seven-point drop since last August. Over half (56%) say it would be better if most incumbents were defeated. Ah, but all politics is local, the late “Tip” O’Neill used to say. OK; fewer than one in three “likely voters” think their own representative is the best person for the job. In short, voters are less supportive than ever of congressional incumbents. The latest Gallup puts Congressional disapproval rating at 74% – the lowest in 37 years.
I wonder if Congress really cares what voters think.
The latest CR extension will be expiring in a week at about the same time that Paul Ryan, chairman of the House Budget Committee, releases the Republican’s version of the 2012 budget. Details haven’t been released but it’s safe to say it will be a far cry from Obama’s extraterrestrial 2012 budget calling for $3.73 trillion in spending of which 44% will be borrowed deficit spending. For every $4 that the federal government takes in during FY 2012, Obama wants to spend a little over $7. However, he has hinted that he might be willing to “compromise” and for every $5 taken in, Obama proposes to spend $7. In the Obama “compromise” only the American taxpayer is taken in.
While the 2012 budget will be another opportunity for the Republicans to restore fiscal sanity, remember that the GOP holds only the House; the Senate and White House are still in Democrat hands. So what is the worst thing that can happen if the Congress can’t agree on a 2012 budget? Either it resumes CRs or it shutters government non-essential services. In other words, the GOP has no clout until it gains control of the Senate and the White House or has the ability to override White House vetoes.
After the last CR vote, more than a few on the GOP side grumbled that they hadn’t been sent to Washington to keep the government running in two and three week intervals. In an effort to send a message to Speaker Boehner, 54 Republicans voted against the last CR, but 66 of the 87 first-term GOP lawmakers voted for it, that’s over 75%, and 85 Democrats voted with the Republicans, suggesting some bipartisanship.
Absent a majority in the Senate, Republicans are going to have to win some Democrats to their viewpoint on spending cuts and deficit reductions. Those who are threatening to withhold their vote for future CRs should consider how “no” votes will help them (and other like-minded lawmakers) achieve what they do want to see happen – further cuts in FY 2011 spending and a pared down FY 2012 budget. So far, incremental spending cuts have worked to achieve the first aim. If the Democrats offer to cut $20 billion in addition to the already conceded $10 billion in cuts, and if they say “take it or leave it” because there will be no more FY 2011 cuts, then Republicans will have to decide whether they will accept “half a loaf” or shut down non-essential government services. Shutting down the government might help win public opinion to the spending cutters’ side. Or it might not. It depends on which side can win the public relations war in convincing the Independents as well as their base of the reasonableness of their position. That’s always “iffy” but Independents tend to be better informed politically than other subsets of voters.
As one political pundit recently noted, those who favor bigger government have succeeded in expanding it incrementally. New programs were layered on top of existing programs over many years. This pundit counseled spending cutters to patiently follow the same course in the remaining months of FY 2011.
He is partly correct. Bush and Obama were considerably helped in their mammoth intrusion into the private sector by the unknown and therefore scary impact that the financial market meltdown might have on the American economy. Obama further leveraged the rising unemployment and sagging economy to justify throwing hundreds of billions of dollars into misbegotten stimulus initiatives. His pièce de résistance, however, was ObamaCare, which could have only happened with absolute majorities in the Senate and House and a Democrat in the White House. GOP incremental spending cutters have none of the power levers for large scale spending reductions to reverse the large scale spending increases of the last three years.
But the GOP will have significant leverage in the negotiations to increase the debt ceiling. Sometime between April 15 and May 31 the government will reach its legal borrowing limit and Congress will have to raise it. The Treasury Department has warned of dire consequences if the US can’t borrow more money and fails to pay its interest obligations. Unlike negotiations on the budget, where a government shutdown hangs in the balance, failing to raise the borrowing limit or delaying the payment of interest is in a different league. It will be the best opportunity for conservatives to get a quid pro quo – serious spending reductions for debt limit increases.
What is frustrating to Republicans in the wake of their landslide 2010 elections is that they can’t accomplish more now. It’s hard to swallow that they might not get the remaining $31 billion of the $61 billion they wanted to cut. The shortfall, however, is mostly symbolic; it’s still a small number compared to the $1.7 trillion that will be spent in the remaining 25 weeks of FY 2011.
And regardless of all of the happy talk in the Democrat caucus, every credible poll indicates Republicans will take the Senate in 2012 because they need only a net change of four to gain the majority and Democrats have 23 vulnerable seats to defend. Even Biden admits to the likelihood of a loss of the Senate – and he was the guy who believed the Democrats would hold the House in the last election. Whether a Republican can dispossess the White House of its present incumbent in 2012 is still a question mark. But Republican majorities in the Senate and House will keep Obama in check even if he is reelected, just as they kept Clinton in check when he was reelected.
The biggest threat to America’s long term economic viability, however, is not $61 billion in spending cuts during FY 2011. It is the growing “market share” of government. For six decades government’s “market share” was 20% of the GDP. Twenty percent is what the feds took in as tax receipts and borrowing and 20% is what it spent. The private sector – all of the businesses, families, and individuals – plus state and local governments took the other 80%. That 80/20 share was remarkably stable until Obama came along.
Moreover, despite all of the tinkering with the tax code to get more money out of those nasty old rich folks who never pay their fair share, federal tax revenues have been stayed in a narrow band within one or two percentage points of 18% of the GDP. That’s all the federal government has ever been able to get regardless of tax rates.
Since federal government spending has historically been 20% of the GDP and tax revenues have historically been 18% of GDP, the federal government ran an historic deficit of 2%, which it had to borrow. Borrowing is nothing more than a tax on future generations to pay back – some of whom aren’t yet born and have no representation in Congress. But borrowing has been tame in the past compared to the hockey stick increase in recent years.
The government’s market share began to increase under Bush with wars in Iraq and Afghanistan, an expensive Medicare drug benefit, and education spending – all ill-conceived notions of “compassionate conservatism" (except the wars.) Government’s market share accelerated under Obama because he is admittedly intent on remaking America in a different mold – one in which government had an expanded role. The government’s market share under Obama has shot up to 25%. Tax revenues, which cannot be forced up as history has shown, actually dropped under the weight of a recession, and the shortfall – about 10% of GDP – was made up by borrowing.
Setting political rhetoric aside, the problem that must be solved by this and future Congresses is how to restore government to its historic 20% market share. America can’t afford Obama’s vision and still be America. Government will never – never – create real economic value that comes remotely close to what would be created by restoring the 5% market share the federal government has taken from the private sector.
As I wrote in my March 14 posting, Playing “Chicken” with the White House, the easy stuff was given up in the first two CRs, and the Democrats are now at a point where serious cuts have to be made if the remaining $51 billion in cuts (a paltry sum in comparison to current spending) demanded by the Republicans are to be made. Keep in mind that there is still no 2011 budget, because the 111th Congress couldn’t get one passed even though it held the almost bullet-proof majority that got ObamaCare passed. Absent a budget, all of the current spending is at the same level as the 2010 budget, and it is the spending at that level ($3.55 trillion, 33% of which was deficit spending) that Congress is now haggling over cutting.
My sense is that Congress has given up hope of agreeing on a 2011 budget and is preparing to focus on the 2012 budget. After all, half of fiscal 2011 has passed so why bother?
In the 25 weeks remaining in the 2011 fiscal year, which ends September 30, the Republicans have so far insisted that the cost of signing on to another CR is $2 billion per week. That is such a small amount of the current average weekly federal spending – $68.3 billion per week – you’d think that waste alone could cough it up. But according to the Democrat Senate caucus, cutting spending by $2 billion per week (less than 3%) is “too extreme” and they cite the immeasurable sacrifice that the Republican meat axe would inflict on education, health research, food inspection and other programs and services.” Wow! I hadn’t realized that our federal government had become so efficient that not even 3% of its expenditures is waste.
A $4 billion spending reduction agreed to by the Democrats on March 4 extended government operations two weeks until March 18, and another $6 billion was found to extend operations three weeks to April 8. The word on the street has it that the Dems will offer another $20 billion in cuts – on top of the $10 billion already conceded – if Boehner and the Tea Party are willing to settle for $30 billion instead of $61 billion. That’s unlikely. At least I hope so.
Now it comes down to who blinks first in the “shut the government down” game. A Rasmussen poll released Friday showed that 57% of “likely voters” thought making deep cuts was more important than avoiding a government shutdown. Only 31% thought keeping the government running was more important. Twelve percent had no opinion.
In a Wall Street Journal op-ed this week, pundit Fred Barnes wrote that the incremental strategy the Republicans have been using is working. Since $2 billion a week was a small spending reduction relative to over $68 billion in average weekly authorized spending, Democrats would have a hard time explaining to the voters why cuts of that magnitude were so unacceptable that they justified shutting down government. After all, Republicans had wrung $10 billion in concessions in two tranches from Senate Democrats and the “budget by the inch” strategy would likely continue to work.
I disagree for two reasons. First, Barnes’ argument is based on logic and logic is not part of the political process – certainly not as politics are practiced in Washington. Emotion fuels the political process because each side has a constituency it must posture for or lose their support and both sides are vying to influence the moderate independent, whose vote will determine who wins in 2012. The Independents and each party’s constituent base are so far apart ideologically that the party leaders have to be almost schizophrenic to placate both.
Second, Barnes assumes that either the Democrats or Republicans will rather cause the government to shut down rather than yield their principled stand for the commonweal. The object of this game, however, is to make demands in full knowledge that the other side will reject them so they are blamed for the government shutdown on their unreasonableness – not as the consequence of a reasonable and principled stand.
There is possibly a third reason why I disagree with Barnes. I think Washington has become so politicized that it is dysfunctional.
That seems to be borne out in the results of another recent Rasmussen survey which came out this week. Just 16% of “likely voters” thought it would be better for the country if most incumbents in Congress were reelected. Just 16%! That’s a seven-point drop since last August. Over half (56%) say it would be better if most incumbents were defeated. Ah, but all politics is local, the late “Tip” O’Neill used to say. OK; fewer than one in three “likely voters” think their own representative is the best person for the job. In short, voters are less supportive than ever of congressional incumbents. The latest Gallup puts Congressional disapproval rating at 74% – the lowest in 37 years.
I wonder if Congress really cares what voters think.
The latest CR extension will be expiring in a week at about the same time that Paul Ryan, chairman of the House Budget Committee, releases the Republican’s version of the 2012 budget. Details haven’t been released but it’s safe to say it will be a far cry from Obama’s extraterrestrial 2012 budget calling for $3.73 trillion in spending of which 44% will be borrowed deficit spending. For every $4 that the federal government takes in during FY 2012, Obama wants to spend a little over $7. However, he has hinted that he might be willing to “compromise” and for every $5 taken in, Obama proposes to spend $7. In the Obama “compromise” only the American taxpayer is taken in.
While the 2012 budget will be another opportunity for the Republicans to restore fiscal sanity, remember that the GOP holds only the House; the Senate and White House are still in Democrat hands. So what is the worst thing that can happen if the Congress can’t agree on a 2012 budget? Either it resumes CRs or it shutters government non-essential services. In other words, the GOP has no clout until it gains control of the Senate and the White House or has the ability to override White House vetoes.
After the last CR vote, more than a few on the GOP side grumbled that they hadn’t been sent to Washington to keep the government running in two and three week intervals. In an effort to send a message to Speaker Boehner, 54 Republicans voted against the last CR, but 66 of the 87 first-term GOP lawmakers voted for it, that’s over 75%, and 85 Democrats voted with the Republicans, suggesting some bipartisanship.
Absent a majority in the Senate, Republicans are going to have to win some Democrats to their viewpoint on spending cuts and deficit reductions. Those who are threatening to withhold their vote for future CRs should consider how “no” votes will help them (and other like-minded lawmakers) achieve what they do want to see happen – further cuts in FY 2011 spending and a pared down FY 2012 budget. So far, incremental spending cuts have worked to achieve the first aim. If the Democrats offer to cut $20 billion in addition to the already conceded $10 billion in cuts, and if they say “take it or leave it” because there will be no more FY 2011 cuts, then Republicans will have to decide whether they will accept “half a loaf” or shut down non-essential government services. Shutting down the government might help win public opinion to the spending cutters’ side. Or it might not. It depends on which side can win the public relations war in convincing the Independents as well as their base of the reasonableness of their position. That’s always “iffy” but Independents tend to be better informed politically than other subsets of voters.
As one political pundit recently noted, those who favor bigger government have succeeded in expanding it incrementally. New programs were layered on top of existing programs over many years. This pundit counseled spending cutters to patiently follow the same course in the remaining months of FY 2011.
He is partly correct. Bush and Obama were considerably helped in their mammoth intrusion into the private sector by the unknown and therefore scary impact that the financial market meltdown might have on the American economy. Obama further leveraged the rising unemployment and sagging economy to justify throwing hundreds of billions of dollars into misbegotten stimulus initiatives. His pièce de résistance, however, was ObamaCare, which could have only happened with absolute majorities in the Senate and House and a Democrat in the White House. GOP incremental spending cutters have none of the power levers for large scale spending reductions to reverse the large scale spending increases of the last three years.
But the GOP will have significant leverage in the negotiations to increase the debt ceiling. Sometime between April 15 and May 31 the government will reach its legal borrowing limit and Congress will have to raise it. The Treasury Department has warned of dire consequences if the US can’t borrow more money and fails to pay its interest obligations. Unlike negotiations on the budget, where a government shutdown hangs in the balance, failing to raise the borrowing limit or delaying the payment of interest is in a different league. It will be the best opportunity for conservatives to get a quid pro quo – serious spending reductions for debt limit increases.
What is frustrating to Republicans in the wake of their landslide 2010 elections is that they can’t accomplish more now. It’s hard to swallow that they might not get the remaining $31 billion of the $61 billion they wanted to cut. The shortfall, however, is mostly symbolic; it’s still a small number compared to the $1.7 trillion that will be spent in the remaining 25 weeks of FY 2011.
And regardless of all of the happy talk in the Democrat caucus, every credible poll indicates Republicans will take the Senate in 2012 because they need only a net change of four to gain the majority and Democrats have 23 vulnerable seats to defend. Even Biden admits to the likelihood of a loss of the Senate – and he was the guy who believed the Democrats would hold the House in the last election. Whether a Republican can dispossess the White House of its present incumbent in 2012 is still a question mark. But Republican majorities in the Senate and House will keep Obama in check even if he is reelected, just as they kept Clinton in check when he was reelected.
The biggest threat to America’s long term economic viability, however, is not $61 billion in spending cuts during FY 2011. It is the growing “market share” of government. For six decades government’s “market share” was 20% of the GDP. Twenty percent is what the feds took in as tax receipts and borrowing and 20% is what it spent. The private sector – all of the businesses, families, and individuals – plus state and local governments took the other 80%. That 80/20 share was remarkably stable until Obama came along.
Moreover, despite all of the tinkering with the tax code to get more money out of those nasty old rich folks who never pay their fair share, federal tax revenues have been stayed in a narrow band within one or two percentage points of 18% of the GDP. That’s all the federal government has ever been able to get regardless of tax rates.
Since federal government spending has historically been 20% of the GDP and tax revenues have historically been 18% of GDP, the federal government ran an historic deficit of 2%, which it had to borrow. Borrowing is nothing more than a tax on future generations to pay back – some of whom aren’t yet born and have no representation in Congress. But borrowing has been tame in the past compared to the hockey stick increase in recent years.
The government’s market share began to increase under Bush with wars in Iraq and Afghanistan, an expensive Medicare drug benefit, and education spending – all ill-conceived notions of “compassionate conservatism" (except the wars.) Government’s market share accelerated under Obama because he is admittedly intent on remaking America in a different mold – one in which government had an expanded role. The government’s market share under Obama has shot up to 25%. Tax revenues, which cannot be forced up as history has shown, actually dropped under the weight of a recession, and the shortfall – about 10% of GDP – was made up by borrowing.
Setting political rhetoric aside, the problem that must be solved by this and future Congresses is how to restore government to its historic 20% market share. America can’t afford Obama’s vision and still be America. Government will never – never – create real economic value that comes remotely close to what would be created by restoring the 5% market share the federal government has taken from the private sector.
No comments:
Post a Comment