Economy & Budget

From Budget Showdowns to Government Shutdown?

Washington’s latest spending skirmish shows its next budget battle may be more contentious than this summer’s.  As rancorous as summer’s debt limit debate was, the resulting “deal” simply shifted the fight.  It only established general deficit reduction targets.  Now come the hard particulars … that means anything from deficit showdowns to government shutdowns.
 
Understanding what the debt deal didn’t do, means first knowing what it did.  First, it set in place a $917 billion reduction in annual federal spending from 2012 through 2021.  That’s all from the subgroup of annually appropriated spending—just 38% of total federal spending.
 
Second, it directs a bipartisan congressional committee to come up with “at least $1.5 trillion” in additional deficit reduction over the decade.  That can come from total federal spending, or—according to Democrats, but not Republicans—additional revenues.
 
All these details are to be decided by Christmas.  If not, then across-the-board spending cuts, known as “sequestration,” will enforce them.
 
Finally, to make things more interesting, a series of deficit-related votes will take place throughout this process: votes on prescribed debt-limit increases and a balanced budget amendment to the Constitution.
 
The next three months are going to be action- and angst-packed, with a heavy emphasis on the latter.
 
What happens this fall—government shutdowns, sequesters?  We can’t know now, but we do know two things:  The 2012 campaign has already begun, and the next budget decisions will be even harder than the ones preceding it.
 
Make no mistake, the presidential race began with Obama’s jobs and deficit reduction proposals.  Barring unforeseen events, the economy and budget will determine its outcome.  The former combatants’ new tone of circumspect civility regarding Obama’s jobs package was already over by the unveiling of his deficit-reduction plan.  The economic and political stakes are so high, that the gloves have—and will continue to—come off again very quickly.
 
Against this high-stakes political backdrop, an equally serious fiscal one stands.  It now moves from broad maneuvering to hand-to-hand combat.  Call it house-to-house-to-White House fighting.
 
It has already started with the unfinished annual spending bills.  Fiscal year 2012 started Oct. 1, and unable to reach agreement again, Washington pushed the deadline until mid-November.  Congress and the administration now have just more than a month to reach detailed agreement and avoid a government shutdown.
 
The summer deal’s sequestration’s offers no escape hatch here.  While sequestration can make cuts, it can’t make decisions.  And although it enforces mandated spending levels, it does not work in real time.  Its built-in delays give Congress and the administration time to avoid its rough justice, but they also leave politicians to their own devices during the interim—creating a twofold problem.
 
Government funding deadlines can’t be massaged by the administration as easily as the debt limit was with debt-management tools.  Also, while Congress and the administration can provide temporary funding—known as Continuing Resolutions (CRs)—these are not solutions but extensions.  And remember:  A CR impasse is how the current deficit debate began earlier this year.  
 
Also, the stakes this time are not what they were with the debt limit.  There failure meant default.  Here gridlock means shutdown.  If politicians came within hours of possible default, why would a government shutdown be a tougher backstop?
 
Default is unprecedented.  Shutdowns are comparatively common.  We had them during Clinton’s presidency.  We just saw a limited federal one involving the Federal Aviation Administration’s funding and one involving Minnesota’s state government.
 
Plus, there is even more for Congress and the administration to argue about now than in the debt deal that got us here.  The debate now broadens from fiscal totals to policy and program specifics.  While still about dollars, now those dollars represent policies embodied in programs.  All those programs became law with political support, so touching them entails tangling with their supporters in and out of government.
 
What about deficit reduction via new taxes—couldn’t this reduce potential spending cut fights?  Forget about it.  There was bipartisan opposition to them in the original debt deal.  Having avoided new taxes then, why would they be acceptable now?  And there is no leverage to change that when the deficit-reduction enforcement mechanism is spending cuts.  Either lawmakers reach agreement to cut spending or spending is cut in lieu of an agreement.  
 
Because of the new deficit debate’s specificity, protagonists will be pitted against each other in new ways—demography, geography, interests—in addition to those of ideology and party.  It should continue not just through this year, but the next election and—without a dramatic change in the status quo—well beyond then too.  There is no end in sight, any more than there is a painless solution.

Sign Up