The Federal Budget Crunch
The Shutdown Matchup: A Preview Of Bouts To Come
As the partisan brawlers on Capitol Hill narrowly avoided the first federal government shutdown in 15 years, others were looking ahead to much larger spending battles Congress faces.
"This is just the undercard," says fiscal policy expert J.D. Foster, of the conservative Heritage Foundation.
After all, the partisan struggle playing out over funding for the six months remaining in the current fiscal year involves just policy and billions of dollars, not policy and trillions.
"The middleweight fight is going to be over the 2012 budget resolution," Foster says. "And the heavyweight match will be over the debt limit."
The administration has warned Congress that by May 16 the nation will hit its current $14.3 trillion debt ceiling, the maximum the federal government can borrow to fund its operations.
A slew of Republicans elected to Congress with Tea Party support have said they'll attempt to block any efforts to raise the ceiling, and GOP leaders have said they'll demand cuts before approving an increase.
Economists note that failing to raise the limit would mean that Congress would have to find more than $1 trillion in savings or revenue if the limit isn't raised.
How that high-stakes skirmish plays out may very well be determined by who is perceived to be the "winner" in the shutdown battle: Democrats, Republicans or President Obama.
Shutdown Unknowns And Unknowns
"There are unknowns here," says Jeffrey Madrick, an economic analyst and author of The Case for Big Government. "We don't normally face a situation like this."
Almost everyone agreed that the stakes over a potential shutdown were high.
"When the debt limit comes up," says Foster of the Heritage Foundation, "the entirety of what the government spends money on is up for debate."
Some members of Congress, he predicts, will attempt to tie debt ceiling action to cuts in programs, and others are likely to make runs at passing balanced-budget amendments in the Republican-controlled House and Democratic-controlled Senate.
Joseph Antos of the business-oriented American Enterprise Institute is one Congress watcher who sees a debate over the debt ceiling, but not much of a fight.
"The threat of [government] default is real," he says, "and the cost to the country is great — in terms of future borrowing costs, but also politically.
"A shutdown for a few days now, a tight budget for the remainder of 2011, and one or two policy statements that pass with the 2011 budget are likely to satisfy new House members," Antos said before the agreement was reached to avoid a shutdown.
The consequences of not raising the limit? Extreme, says Foster.
There have been rumors that some House Republicans would like to force votes on incremental debt ceiling increases — a prospect Foster finds highly unlikely.
The prospect of many votes having to be taken to raise the ceiling, even after a bruising battle? Low, he says.
"Members don't like multiple votes on a debt limit," Foster says, because it gives future opponents an easy, if unfair, line of attack.
The Confidence Game
There was a bump in public confidence in the ability of Congress and the president to get work done after the tax extension agreement was forged late last year.
That confidence has been taking a beating in recent weeks.
"The bottom line is this: You have a superpower that's paralyzed," says Thomas Ferguson, a political scientist at the University of Massachusetts. "That's pretty amazing.
"They can't tax. They can't spend. They can't agree on things," he says.
The partisan divide is expected to deepen when Congress finally finishes up with current-year budget machinations and tackles the coming year. House Republicans have already laid down their marker: a plan that would essentially privatize Medicare, cap the money available for Medicaid and largely rule out tax increases.
Antos predicts that the House blueprint, devised by GOP Rep. Paul Ryan of Wisconsin, will not pass the Senate, and anything that passes the Senate probably won't pass the House.
"I would not be surprised if we ended up with a 2012 budget in which important budget functions are funded as a continuing resolution at levels similar to the 2011 levels," he says. A continuing resolution is a measure that provides continued, temporary funding at previous-year budget levels.
According to David Kotok, an investment strategist, "What we've been witnessing has nothing to do with money — it's all a prelude to next year's election. It's a posturing game of Democrats versus Republicans to the detriment of all of their constituents."
This is "part of the democratic process," says Christopher Whalen, an investment banker and risk analyst. "Congress should not pass a bad budget, even if it means a protracted shutdown."
Obama The Mediator
Critics on both the left and the right have had their way with the president over how he's engaged in the budget debate, and what that portends as he settles into his re-election campaign.
Foster, of the Heritage Foundation, likened Obama to a "schoolmarm," and the progressive Madrick says he's lost faith in the president.
"The president is allowing himself to be a mediator between Republicans and Democrats," he says. "The leader should not be the mediator."
It's the president's tendency to play what Madrick characterized as "defensive politics," that some Democrats say has allowed Republicans to define spending cuts as an economic imperative.
"He should be out there explaining to the people that the deficit is not the issue at the moment — it's investing in jobs and the American economy," he says.
The current food fight or bar fight — the American political process usually resembles one or the other, Foster says — will impart many lessons.
One of them?
"The fire in the belly of the Tea Party," he says, "will not be at all quenched." Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.