Daily Austerity Watch 4/6/11 — Government Shutdown Likely

The Washington media elite is giving Daily Austerity Watch whiplash.  First, pundits were certain that the government was going to shut down as the Democrats and Republicans continue their game of fiscal chicken.  Then they were just as certain that a deal was imminent.   The pendulum now has swung again toward pessimism.

Most of the 36 experts polled by The Fiscal Times expect the federal government to close its doors for at least a “few days” after the latest stop-gap funding measure expires next week.  Both sides blame each other for the impasse. Leave it to former Reagan Budget Director David Stockman set an appropriately dramatic tone.

“It’s time for the Republicans to man up and let it burn! Discretionary spending is out of control, and if the GOP doesn’t force a big roll-back, they should have their mouths washed out with soap for lying about no new taxes,” the website quotes him as saying.

For the Democrats, the budget battle represents the worst of all worlds.  Their traditional liberal base is  mad that they are going along with any cuts , let alone the $33 billion they proposed slashing from the President Obama’s budget.   Republicans rejected the olive branch anyway as insufficient.

What’s going on in Washington, though, is more about political theater than fiscal policy.   House Speaker John Boehner has proposed a one week extension that cuts $12 billion, a proposal rejected by Obama. Media reports say the Republicans want at least $40 billion in cuts.  A $7 billion difference seems pretty trivial by the elephantine standards if the federal government.  Members of Congress should watch the hit cable show Pawn Stars for tips on negotiating.

Republicans seem to be forgetting the lessons of 1995 when they were overwhelming blamed by the public for that shutdown.  President Bill Clinton played Newt Gingrich, then the House Speaker, like a violin.   The Republicans risk alienating independents if they push too hard on pet causes such as defunding NPR and Planned Parenthood that will yield modest fiscal benefits.  The Center for Budget and Policy Priorities attacked Rep. Paul Ryan’s (R-Wis) budget plan for 2012 which eyes $4.3 trillion in cuts over the next decade or robbing from the poor to help the rich.

“… (It) would produce the largest redistribution of income from the bottom to the top in modern U.S. history, while increasing poverty and inequality more than any measure in recent times and possibly in the nation’s history,” Robert Greenstein, CPBB executive director, wrote in a blog post.

None of the issues brought up in the budget saga is new. It’s among the worst kept secrets in U.S. history that entitlement spending is out of control.   Now, as the 2012 presidential election looms,  both Democrats and Republicans are in a steel cage match fight over who can cut government spending deepest and still manage to improve unemployment.   The problem with that line of thinking is that government spending creates jobs — lots of them — which may be in jeopardy if austerity measures are too severe.

That’s the problem with politicians: they don’t see the forest for the trees.

–Jonathan Berr