Thursday, March 31, 2011

Budget Maneuvering

ABC News has reported, and Vice President Biden has confirmed, that a budget deal, providing $33 billion in spending cuts from this year's budget, has been reached. This would represent 3% of discretionary spending, less than 1% reduction in spending, and less than 2% of the deficit. The agreement, moreover, is only tentative, because it does not include either a determination as to what policy riders will be attached nor where the decreases will be made.

Tuesday, the Associated Press reported that Senate Majority Leader Harry Reid had

challenged Boehner. "Republicans need to decide which is worse: angering their tea party base, or shutting down the government and threatening our fragile economy even more."

Harry seems to mean well but.... could he be any more naive? The GOP never intended to shut down the government. In late October, Politico had reported

House Minority Whip Eric Cantor (R-Va.) said a Republican House won’t shut down the government even if Congress and President Barack Obama can’t agree on a budget.
“I don’t think this country is desirous of seeing a government that is shut down,” he told reporters on a conference call. “People want to see a government that does what people expect it to do, which is to limit it in scope and reduce spending,” he said.

“It is my hope that the president lives up to his commitment when he says he’s interested in cutting spending,” he said. “The people expect leadership that will deliver results. People want to see results. They want to get back to work. And hopefully we can work to that end together,” he said.

House Minority Leader John Boehner (R-Ohio) said Wednesday Republicans would “not compromise on our principles” with President Obama. But he’s also thrown cold water on the idea of freezing government operations, which happened in 1995 after a Republican Congress couldn’t agree with President Bill Clinton on a budget.

Some Republicans blame the shutdown for Clinton's reelection.

But the notion that Republicans would be chastened by the fear that they would be "threatening our fragile economy even more" is really quite quaint. Late last month we learned

House Republicans’ $61 billion budget-cutting plan would cost 700,000 jobs, according to a report likely to inflame the debate over the U.S. government deficit.

The measure would reduce real economic growth this year by 0.5 percentage points and by 0.2 percentage points next year, resulting in 700,000 fewer jobs by the end of 2012, said Mark Zandi, chief economist for Moody’s Analytics. He said budget- cutters should wait until the U.S. economy is stronger, saying Republicans “would be taking an unnecessary chance with the recovery.”


Goldman Sachs said the House budget plan would shave between 1.5 and 2 percentage points off economic growth during the second and third quarters of this year.

Friends don't let friends push reductions in government spending during economic slumps exacerbated by the reluctance of consumers and the private sector to spend money. Some money has to be injected into the system, and government is the third spoke in that trio.

That did not deter the GOP, which will pursue policy objectives with the riders. The AP reported, credibly, "opposition remains strong to GOP attempts to defund or otherwise hamper implementation of the year-old health care law." There is little that Barack Obama will not negotiate away other than his family and his signature accomplishment, health care (or at least the latter). Everything else is on the table as this President avoids at nearly all costs calling the GOP's bluff and incurring the discomfort of defending Democratic values.

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