Debt / Economy / Fiscal policy

Egoism Over Action: The Thoughtlessness Behind the Latest Budget Talks

For those in the D.C. metro area, this month has been pretty normal. Employees were furloughed. The government shut down. Partisan bickering continued. The city was placed on high alert after a failed attempt to break through White House security, which led to a car chase down Constitution Avenue. Congressmen realized their approval ratings would continue to drop with the Congressional standoff, so they worked together long enough to pass a bill that postponed the government budget talks until 2014. Due to the bill’s passage, the government will be funded at sequestration levels through January 15 and the debt limit has been suspended until February 7.

These new deadlines for Congressional budget talks provided an additional three months for Congress to reach an agreement. Yet, as the Huffington Post noted earlier this week, “something is noticeably absent from congressional candidates’ rampant finger-wagging over this month’s bipartisan deal to extend the nation’s borrowing limit and reopen government concrete proposals to fundamentally alter the U.S. balance sheet.” Any long-term solution requires a change in the tax codes and “big-ticket” spenders for the USG: Social Security, Medicare, Medicaid, and the defense budget.

President George H. W. Bush selflessly sacrificed his political career to establish a viable budget with the Budget Enforcement Act of 1990. The Act set caps on annually appropriated spending and had a “pay-as-you-go” or “PAYGO” clause, which mandated that any new entitlements or taxes had to be deficit-neutral or deficit-reducing. Many political scientists believe that Bush Sr. was only elected into one term because, by passing this bill, he broke his famous campaign promise, “Read my lips. No new taxes.”

Republican politicians view Bush Sr. as their “what-not-to-do” example. Rule #1: Do not raise taxes or you will lose your reelection. Raising taxes and working with the Democrats to pass a budget-neutral bill did not work for H.W., so why would it help any other politicians? Neither Democrats nor Republicans want to put themselves on the political front-line by appeasing the other party.

Ironically, this selfish decision isn’t helping anyone, and is especially hurting the current congressional members. Republicans who thought their approval ratings would drop if they showed bipartisan leanings during the government shutdown were in for a surprise when they saw their approval ratings drop dramatically during the latest seventeen-day shutdown.

approval graph

Figure 1: U.S. Approval Ratings in September and October (data taken from Gallup.com)

As you can see in Figure 1, approval ratings of all national political leaders fell during October’s government shutdown. Both congressional parties and the executive branch saw significant drops in national approval. Republicans felt the most animosity with a ten percent plunge from 38 percent to 28 percent. But President Obama and congressional Democrats didn’t leave the arena unscathed. Government leaders need to understand that without a long-term solution to the federal budget problems, their popularity (and therefore their political power) will continue to dwindle.  And a sustainable solution will not exist without bipartisan action.

Congressional habits need to change. Quickly. Congress’s current inability to compromise is not only negatively affecting their approval ratings, but also the fiscal sustainability of necessary government programs. With the last furlough, government agencies like the Department of Defense were able to reinstate the majority of their employees using funds that were previously appropriated to other defense projects. According to the New York Times, instead of overhauling aircraft carriers as planned, the Navy used the nearly $1 billion of unspent money toward its shipbuilding program.   The Army deferred maintenance on over 10,000 pieces of military equipment. During the shutdown, the District was only allowed to keep its services running because Mayor Vincent Gray tapped a special reserve fund of $218 million. If government shutdowns and sequesters become a normal step in the budget process, government agencies will continue to dip into their reserves to finance crucial government programs. Yet, these options are growing more limited with each shutdown and sequester.

As Adam Smith wrote, “every man lives by exchanging.” Fear of becoming the twenty-first century H.W. is holding back many congressional members from beginning a serious dialogue about government’s budget future. This attitude needs to change. Not just for the sake of polling numbers, but for the sake of this country and its people.

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