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There were reports about 10 days ago that the crowd in Washington reached a budget deal, for the remainder of the 2011 fiscal year, with $33 billion of cuts. That number was disappointingly low. I wrote at the time that if this was a kiss-your-sister deal, we didn’t have any siblings that looked like Claudia Schiffer.

I knew it was unrealistic to expect the full $61 billion, but I explained that $45 billion was a realistic target.

We now have a new agreement, which supposedly is final, and the amount of budget cuts has climbed to $38 billion. So our sister is getting prettier, but she still isn’t close to being a supermodel. Here are the highlights (or lowlights) from the New York Times story.

Congressional leaders and President Obama headed off a shutdown of the government with less than two hours to spare Friday night under a tentative budget deal that would cut $38 billion from federal spending this year. …the budget measure would not include provisions sought by Republicans to limit environmental regulations and to restrict financing for Planned Parenthood and other groups that provide abortions.

As with all deals (such as last December’s agreement extending the 2001 and 2003 tax cuts), there are good and bad provisions. The good news is:

o President Obama, before the current fiscal year began last October 1, wanted a $40 billion increase for these “discretionary” programs. Cutting $38 billion may not be a big number, but it is a step in the right direction. And it is the first time fiscal policy has moved in the right direction in at least 10 years.

o There will be no funding for additional IRS agents. This is a nice victory. Implementing Obamacare would require as many as 16,000 new tax bureaucrats to harass the American people, so at least that process will be stalled.

o A school choice program for Washington, DC, has been restored, thus reversing President Obama’s disgusting decision to kill the program and sacrifice poor black children to advance the greedy interests of the teacher unions.

Now let’s look at the less desirable parts of the agreement.

o Total spending jumped by almost $2 trillion during the Bush-Obama spending binge, so a $38 billion cut is almost too small to mention.

o Left-wing organizations such as Planned Parenthood will continue to feed at the public trough, something that should be objectionable to everyone, regardless of your views on abortion.

o Obamacare is not repealed (not that I ever thought that was possible) and there is no restriction on the EPA’s unilateral assertion that is has regulatory power to implement radical Kyoto-style global warming policies.

I will have more comments this week about what happens next. Suffice to say that this was just one battle in a long war.

The 2012 budget resolution, for instance, will be a key test of fiscal responsibility, but in this case the debate will be about $trillions rather than $billions. The debt limit vote will an opportunity for some much-needed reform of the budget process. And it is quite likely that there will be another potential shutdown fight when it is time to put together appropriations bills for the 2012 fiscal year, which starts October 1.

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Press reports indicate that there is a tentative agreement between Republicans and Democrats to trim $33 billion of spending for the remainder of the current fiscal year. Here are a few blurbs from a story in The Hill.

A source familiar with the talks said members of the Senate and House Appropriations panels are working toward a target of $33 billion in spending cuts. …The $33 billion would be close to the cuts first proposed by House GOP leaders, who moved to $61 billion in proposed cuts under pressure from freshmen in their conference. Policy language defunding the new healthcare law and Planned Parenthood, which conservatives have insisted should be in a final deal, remains a sticking point.

If the final result is anywhere close to $33 billion, this has to be considered a disappointment. I was never under any illusion that GOPers would get $61 billion of cuts. But I was hoping the final number would be somewhere in the range of $45 billion.

To put this in context, the budget for the current fiscal year is $3,800 billion. And that’s almost $2,000 billion higher than it was when Bill Clinton left office. Yet politicians, after a 10-year binge of higher spending, can only find $33 billion of cuts?!?

One Capitol Hill staffer told me that this is a “kiss-your-sister” deal, implying that neither side won or lost. But if that’s the case, then I’m definitely not related to Claudia Schiffer. In this case, my sister is…well, never mind…I don’t want to be snarky.

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Yesterday, I analyzed how the GOP should fight the budget battle, but I may have made a big mistake. I assumed the Republican leadership actually wanted to do the right thing. I thought they learned the right lessons from the disastrous Bush years, and that the GOP no longer would be handmaidens for big government. And I naively assumed that the Republican leadership would not betray the base and stab the Tea Party in the back.

Unfortunately, if this Washington Post story is accurate, that may be what is happening.

Having difficulty finding consensus within their own ranks, House Republican leaders have begun courting moderate Democrats on several key fiscal issues, including a deal to avoid a government shutdown at the end of next week. The basic outline would involve more than $30 billion in cuts for the 2011 spending package, well short of the $61 billion initially demanded by freshman Republicans and other conservatives, according to senior aides in both parties. Such a deal probably would be acceptable to Senate leaders and President Obama as long as the House didn’t impose funding restrictions on certain social and regulatory programs supported by Democrats, Senate and administration aides said.

Having been in Washington for 25 years, I’m not blind to reality. I knew it was never going to be possible to get all $61 billion of cuts. At some point, there would be a compromise. And I also was aware that the GOP “riders” – such as blocking Obamacare, curtailing the EPA’s power grab, and defunding the leeches at Planned Parenthood – were an uphill battle.

But I thought the GOP leadership would fight and get a decent deal rather than unilaterally surrender. If the Washington Post report is true and Republicans act like the French army, it will discourage the base and cause a rift with the Tea Party. So it’s dumb politics and dumb policy.

Let’s keep our fingers crossed, though, and hope this is just a trial balloon that quickly will be shot down.

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According to news reports, Democrats and Republicans are unlikely to reach any sort of budget agreement before April 8, when a short-term spending bill for the current fiscal year expires.

Barring some new development, this could mean a shutdown of the non-essential parts of the government.

This makes both sides very nervous. Democrats don’t want the spending spigot turned off and are worried that voters might conclude that there’s no reason to ever re-open departments such as Housing and Urban Development. Republicans, meanwhile, mostly worry that they might look unreasonable and get blamed if certain parts of the government are mothballed and voters can’t get passports or visit national parks.

Given this state of play, what’s the best strategy for fiscal conservatives, libertarians, and other advocates of smaller government?

Fred Barnes of the Weekly Standard thinks Republicans should continue with short-term spending bills.

…the incremental strategy is working. Republicans have passed two short-term measures to keep the government in operation since early March while slashing $10 billion in spending. At this rate, they would achieve the target of GOP congressional leaders of lopping off $61 billion from President Obama’s proposed budget in the final seven months of the 2011 fiscal year. There’s every reason to believe the incremental strategy would continue to succeed.

He’s worried that a more confrontational approach, where the GOP passes a take-it-or-leave-it spending bill, might backfire – even though any shutdown would exist solely because Senator Reid and/or President Obama refused to act.

Would a shutdown give Republicans more muscle in negotiating for cuts? …Maybe it would. But it might not. …So long as they control the Senate and White House, Democrats will reject massive cuts. Republicans also want to bar spending for Planned Parenthood, the Corporation for Public Broadcasting, and Mr. Obama’s health-care program. Attach any of these prohibitions to a spending measure and Democratic opposition is certain. Should Republicans insist, we’ll get a government shutdown. This is a big gamble. …Indeed it might discredit Republicans and boost Mr. Obama in the same way the shutdown in 1995 hurt Republicans and lifted President Bill Clinton out of the doldrums. It could alienate independent voters so critical to the Republican triumph in 2010. True enough, the political atmosphere is more favorable to serious spending reductions than it was 16 years ago. …But why take a chance?

I think Barnes is a bit off in his portrayal of what happened in 1995, as I’ve previously explained, but these are all fair points. A “shutdown” fight could be considered uncharted territory.

Keith Hennessey, a former Hill staffer and Bush Administration official, also is skeptical of a confrontational approach. Instead, he suggests that the GOP increase the pressure on Democrats by slowly increasing the amount of weekly spending cuts.

While negotiating with the President’s team and Senate Democrats, in this variant House Republicans continue to pass short-term Continuing Resolutions as long as there is not an acceptable full-year deal. In these repeated future CRs, they ratchet up the spending cuts by the paltry figure of only $100 million each week. …Under this new variant, as April 8th approaches House Republicans would pass another three week CR, one which cuts $2.1 B in its first week, $2.2 B in its second week, and $2.3 B in its third week. …Such a tiny weekly increment would be nearly impossible for Democrats to reject. And yet if continued through the end of this fiscal year, $4.5 B of discretionary spending would be cut in the final week, that of September 23rd. This strategy…poses zero additional risk for Congressional Republicans. They would maintain the high ground on spending cuts and remain on the offensive for the next six months.

There’s a lot to like about Keith’s approach. If successful, he explains, GOPers could wind up with $82 billion of cuts rather than just $61 billion.

But here’s my concern about an incremental strategy. What makes anyone think that the left will go along with short-term spending bills, regardless of whether they cut $2 billion per week, or even more?

Democrats already have agreed to $10 billion of cuts, and even though that’s very trivial when compared to total spending (akin to a couple of french fries out of a Big Mac meal), the pro-spending lobbies and their allies on Capitol Hill are balking at the thought of additional cuts. So while it might be possible to push through a couple of additional short-term spending bills, there will come a point when Democrats refuse to play ball. And when that happens, we’re back to a partial shutdown.

Here’s how constitutional lawyer James Bopp, Jr., explained the issue in a piece for the Washington Times.

A government shutdown is inevitable because President Obama will insist on it. Nothing the Republicans do, short of total capitulation, will prevent this from happening. …With a three-week extension of government funding (which included $6 billion in cuts) expiring April 8, now is the time to escalate one’s bid. Demand $12 billion in cuts the next time. And when the shutdown occurs because of an Obama veto or a vote in the Democrat-controlled Senate, the House should keep passing bills to reopen the government, coupling it with more spending cuts. …There is a fundamental contradiction in the Democrats’ shutting down the government. The Democrats are the party of government. It is like a bank robber, caught in the act, who threatens to pull the trigger on himself if arrested; what would the cop say but, “Go ahead”? The government shutdown threat defeats the Democrats own objective and is thus ultimately self-defeating, while the Republicans protect the bank depositors – the taxpayers – from the bank robber.

I think this is largely correct, particularly in that there almost certainly will be a shutdown fight. The only question is when it will happen. And if a shutdown battle is inevitable, advocates of smaller government should decide whether it’s better to have that fight sooner rather than later.

My instinct is that it would be better to fight now. GOP resolve presumably will decrease over time, particularly since the “easy” spending cuts get used up first. Moreover, it is quite likely that a strategy of short-term spending bills will complicate GOP efforts to get budget process reform in a couple of months in exchange for an increase in the debt limit.

Democrats surely don’t want the GOP to have another opportunity to restrain the size of government, so they would insist on an increase in the federal government’s borrowing authority as the price for approving whatever short-term spending bill is being considered around that time. Republicans presumably will balk at that demand. But that brings us back, once again, to a shutdown fight. Only this time, it will be complicated by demagogic assertions of a default.

So long as the final result is a smaller burden of government, there is no right or wrong answer about the process. It’s simply a question of which approach is more likely to achieve the desired outcome. I think fighting now is better than fighting later, but if the GOP chooses a strategy of short-term spending bills, I hope I’m wrong.

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Among advocates of limited government, there is growing unease about the fiscal fight in Washington.

This is not because anything bad has happened. Indeed, Democrats thus far have been acquiescing – at least on a temporary basis – to conservative demands for $61 billion of spending cuts over the rest of the current fiscal year. This is remarkable after 10 years of endlessly expanding government.

Here’s what Jennifer Rubin wrote at her Right Turn blog.

A senior Senate adviser wisecracked, “A month ago, they said they couldn’t possibly cut a dime. Then they said the $4 billion [in] cuts in the first CR were a non-starter. Now they’re bragging about cutting spending?” It is a remarkable turn of events and another sign that Reid was bested in this round of budget battling. Twice now he capitulated to House Republicans.

This analysis is right, and it is very similar to what I wrote back on March 2 regarding the first short-term agreement.

So why, then, am I worried?

I’m nervous because the fiscal fight is evolving in a bad direction. In that March 2 post, I warned that “Republicans should be very careful about having their energy dissipated by a series of diversionary battles over short-run spending bills.”

That prediction, unfortunately, seems to have been rather accurate. Democrats have reluctantly agreed to some spending cuts, but their decisions perhaps could be characterized as a rope-a-dope strategy – tactical retreats designed to regain control over the field of battle and win the ultimate fiscal war.

The elephant in the living room, of course, is the threat of a government shutdown. Republicans seem terrified that they will get blamed if there is a stalemate and this leads to a shutdown of the non-essential parts of the government. And they are terrified of this outcome even if they have approved a budget and the stalemate exists solely because Harry Reid has blocked their budget in the Senate and/or Barack Obama has vetoed their budget.

I’ve already explained, in an article for National Review Online, why GOPers should not allow themselves to be blackmailed on this basis. The 1995 shutdown was a big policy success. Republicans did not get everything they wanted, to be sure, but the final result was real fiscal restraint – a four-year period where government spending grew by an average of less than 3 percent.

Moreover, the shutdown was hardly a political setback. Democrats on Capitol Hill were defecting to the GOP side during the fight, and the political people in the Clinton Administration were genuinely concerned that they might not be able to sustain the President’s veto. Some GOP political operatives thought, after the fight was over, that they lost because Clinton polled better than Gingrich, but this certainly didn’t keep Republicans from comfortably holding the House in 1996 and actually picking up seats in the Senate.

So what happens now? Republicans basically have two choices of how to proceed. Both options have some risk, but one approach almost surely leads to failure.

1. Draw a line in the sand and pass a strong budget with cuts and meaningful reforms, even if it means the Democrats block the spending bill and cause a shutdown.

Upsides – This approach is more likely to lead to an outcome that reduces the burden of government spending. Moreover, it surely would trigger more activism from libertarians, conservatives, and other supporters of limited government. A victory based on this approach (or even a draw) creates momentum for both the FY2012 budget resolution battle and the debt limit fight.

Downsides – The left, including the establishment press, will portray the GOP negatively. More specifically, they will claim Republicans are “shutting down the government” because of supposedly extraneous issues like abortion (i.e., the funding controversy over Planned Parenthood), the environment (the debate over the “rider” provision to curtail the EPA’s power grab), or healthcare (defunding Obamacare).

2. Do everything possible to avoid a shutdown, even if it means higher spending and no reform.

Upsides – There is no risk of being blamed for a shutdown.

Downsides – This French-army approach basically means that Republicans give up on fiscal policy for the next 21 months. Surrendering to avoid a shutdown means the burden of spending is higher. It means no program reforms or eliminations. Because of this precedent, it is highly unlikely that the GOP could attach meaningful fiscal conditions to the debt limit. Similarly, the loss of momentum would carry over to the budget resolution, undermining chances for fiscal reform in the 2012 fiscal year budget. Last but not least, the “base” would be very disappointed as activists from the Tea Party and elsewhere begin to conclude that fighting against big government is a fool’s errand.

Even in the most ideal scenario, using the line-in-the-sand strategy, fiscal conservatives in the House will not get everything they want. The real issue is which side has the upper hand in the negotiations.

The fight-rather-than-surrender approach gives the GOP leverage. They almost surely won’t get $61 billion of cuts, but they’ll be much closer to that number than with the French-army approach. They won’t succeed with all the “riders,” but they’ll make progress – perhaps temporarily setting aside the Obamacare issue in exchange for clipping the EPA’s wings, or gutting Planned Parenthood but letting NPR off the hook.

Politicians inevitably are worried about the political consequences of any strategy. That’s harder to judge, but they can protect themselves by not making it seem as if they welcome a partial shutdown. I explained in the National Review article that there are several lesson that Republicans can learn from 1995 that can help them prevail in 2011.

First and foremost, Republicans should keep passing bills to reopen the entire government. They should stress that they want the government open and explain that it is only closed because of Harry Reid’s obstinate support for big government and/or Barack Obama’s use of his veto pen on behalf of special interests. …Keep passing bills to reopen the parts of the government that voters actually care about, such as VA hospitals, the Social Security Administration, and national parks. …Remember that a government shutdown generally puts more financial pressure on the Left. If there is a lengthy showdown, Democratic constituencies begin to squeal. …In 1995, Republicans had to deal with a very hostile press corps. There was no Fox News, no Internet as we know it today, and no cadre of talk-radio hosts to augment Rush Limbaugh. So while it is true that CBS, NBC, ABC, CNN, the New York Times, and the Washington Post will regurgitate Democratic talking points, many voters will have access to conservative news sources, something that was not the case in 1995.

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In this discussion on Larry Kudlow’s show, I reiterate the central point from my National Review article and explain that the government shutdown in 1995 led to real fiscal restraint. If that was a loss for the GOP, I hope they lose again this year.

But will this happen? If Republicans don’t surrender, a shutdown is inevitable. The Democrats clearly have adopted a rope-a-dope strategy, hoping GOPers will preemptively compromise. Here’s an excerpt from a story in the Washington Times.

A top Senate Democrat said Sunday that the $6 billion in additional spending cuts that his party offered is the limit Democrats can accept — drawing a line well short of Republicans’ goal with less than two weeks to go before a government shutdown if the two sides can’t agree. Sen. Richard J. Durbin of Illinois, the second-ranking Democrat in the chamber, said the $6 billion proposal, released Friday, has “pushed this to the limit” on domestic spending. …Meanwhile, the Senate’s top Republican said his talks with President Obama and Vice President Joseph R. Biden Jr. show that the White House is not serious about tackling longer-term spending challenges, making it difficult for Congress to work with the president. …“I’ve had plenty of conversations with them. What I don’t see now is any willingness to do anything that’s difficult,” Senate Minority Leader Mitch McConnell, Kentucky Republican, said on CBS‘ “Face the Nation” program. “So far, I don’t see the level of seriousness that we need.”

There’s no reason why Republicans should unilaterally compromise, but I’m worried. One major problem for the GOP is a misguided focus on red ink. Too many people, including Senators, Representatives, pundits, and policy wonks, keep talking about deficits and debt. Government borrowing is not desirable, but red ink is merely a symptom of excessive spending.

This is why all the focus should be about controlling the size and scope of Washington. That’s not only smart economics, it’s also astute politics. If the short-term question is how to save $61 billion from FY2011 spending levels and the long-term question is how to cap federal government spending at 20 percent of GDP, higher taxes obviously are not relevant.

But if Republicans keep talking about deficits and debt, that automatically puts tax increases on the table. And the primary long-run goal of the Democrats is to seduce GOPers into going along with a tax increase.

The next thing to watch for is what happens, presumably later today, when the Senate votes on the House plan and the Democrat’s proposal. The Associated Press is probably correct that these are key test votes.

The Senate appears likely to reject both a slashing GOP budget bill and a less ambitious Democratic alternative. …Neither measure can muster the 60 votes required under Senate procedures to advance; not a single Democrat is likely to vote for the GOP measure, and some may shy away from the Democratic bill as well. That could put pressure on House Speaker John Boehner, R-Ohio, as well as other congressional leaders of both parties to find a compromise. …By the same standard, the vote on the Senate Democratic alternative — it would cut about $5 billion from domestic agencies compared with about $60 billion under the House GOP plan — is unlikely to get unanimous support from Democrats, especially moderates up for re-election in 2012.

What Republicans need to understand is that they hold the trump card. Taxpayers will save much more than $61 billion if Democratic obstinacy results in a government shutdown.

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A large number of Democrats voted with Republicans in the House yesterday to pass a two-week spending bill that includes $4 billion in cuts compared to what Obama requested. This is a modest victory for the GOP since they can truthfully claim that they are on target to impose the equivalent of $100 billion of cuts over a full fiscal year.

And it appears the Senate will go along with the House proposal, as reported today by the Washington Post.

The deal, which eliminates dozens of earmarks and a handful of little-known programs that President Obama has identified as unnecessary, sailed through the House on a 335 to 91 vote. Senate Majority Leader Harry M. Reid (D-Nev.), who initially resisted including any cuts in a short-term funding extension, predicted that it will pass that chamber as early as Wednesday.

Some people correctly note that a $4 billion cut is trivial since government spending has ballooned by $2 trillion during the Bush-Obama spending binge – especially since at least some of the supposed spending cut is based on the dishonest Washington practice of measuring “cuts” on the basis of how much Obama wanted to spend rather than nominal changes from one year to the next. Nonetheless, it is a very positive development that the conversation has shifted from “how much should spending be increased?” to “how much should spending be cut?”

That being said, the battle is far from over. Indeed, the GOP began the 1995 shutdown fight in good shape. As I explained in a recent National Review article, a significant number of congressional Democrats sided with Republicans and it appeared that Clinton was on the defensive.

But GOPers ultimately did not get everything they wanted that year, in part because Clinton and the Democrats were able to regroup when the government was temporarily re-opened for a three-week period. Democrats today presumably view the current two-week agreement as a similar opportunity to make a short-term tactical retreat in hopes of winning bigger battles in the future (not just the fight over FY2011 spending levels, but also the upcoming FY2012 budget resolution debate and the debt limit conflict in June or July).

In other words, Republicans should be very careful about having their energy dissipated by a series of diversionary battles over short-run spending bills. At the very least, they need to insist that all such bills include pro-rated spending cuts to fulfill their promise of reducing Obama’s request by $100 billion.

At some point, perhaps when the two-week agreement expires, Democrats will balk at that tiny level of fiscal discipline. And if Republicans also hold firm, this means a government shutdown. Obama and Reid will imply this is somehow the fault of the GOP, but the Washington Post story suggests that recycling the 1995 strategy may not be very successful for the left.

Republicans bore the brunt of the blame that time. A Washington Post poll released this week suggested that this time, voters would apportion fault about equally to both parties. What has changed? The state of the economy is far more precarious than it was in the mid-1990s, the deficit is 10 times as large, and the public’s confidence in elected officials is even lower. …But if the politics of a shutdown are in many ways more treacherous than they were in 1995, the actual effects of one would probably be less disruptive. Indeed, so many things have now been declared essential services that the government might “shut down” without most Americans noticing much difference. As happened in 1995, air traffic controllers would still watch the skies. And a wider swath of military, diplomatic and national security personnel would stay on the job to deal with concerns in a post-9/11 world. …Therein lies the paradox under all the talk of a shutdown. Privately, some Democrats say they fear that a closure that barely affects the daily lives of most Americans could bolster conservatives’ argument that much of what the government does is unnecessary.

The final sentence of this excerpt is key. Would anybody (other than interest groups with snouts in federal trough) notice or care if the Department of Housing and Urban Development was shut down? Is anybody going to lose sleep if the Department of Energy is in hibernation?

In other words, a “government shutdown” would reveal that most of the “non-essential” parts of government are not necessary in the short run or the long run.

This is why Republicans, if they are reasonably astute, hold the upper hand in the current negotiations. They should speak softly and sound reasonable, but carry the big stick of a shutdown in order to ensure that the spending cut target for FY2011 spending is not eroded. And if they prevail, that will have a very positive carryover effect on the looming fights on the FY2012 budget resolution as well as the debt limit.

One final comment about the Washington Post report. The story asserts, in the excerpt below, that Clinton had fiscal credibility because he imposed a tax increase in 1993. But as I have already explained, that tax increase was a miserable failure and even Clinton’s own OMB forecast, made 18 months after the tax increase was adopted, showed permanent deficits of more than $200 billion.

Obama, who has overseen an expansion in spending, does not have the fiscal credibility that helped give President Bill Clinton the winning political hand in 1995 and 1996. Clinton invested significant political capital in reducing the deficit, first by passing his 1993 economic package, which included tax increases.

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