The Budget Battle Boils Over

A Clinton vs. Gingrich showdown may be on the horizon.

Representative Paul Ryan, the Wisconsin Republican who chairs the House Budget Committee, summed up his party’s position in eight words: “This isn’t a budget - this is a cause.” Meanwhile, President Obama chided Congress for failing to budget, but intimated that Republicans would have to bend more to get a bipartisan deal. “We can’t have a my way or the highway approach to the problem,” he said.

And so the budget battle, which has dragged on for so long since last November’s election tipped the balance of power in Congress, appears to be heading towards a climax. The president isn’t interested in any more continuing resolutions. Democrats are trying to preserve all the programs they can and – urged on by the Tea Party movement – the freshmen class of the GOP is pushing for deep budget cuts. This is a massive game of chicken, on the scale of Clinton vs. Gingrich back in 1994, and the outcome is equally uncertain, except for the surety that most everyone will be unhappy with a compromise.

“I can’t have my agencies making plans on two-week budgets,” Obama said yesterday. “What we are not going to do is once again put off something that should have gotten done months ago.” The current continuing resolution that funds the federal government expires on Friday. Republicans offered to support another continuing resolution that would last a week more, provided it contained $12 billion in spending cuts. Unwilling to endure the fiscal equivalent of a death by a thousand cuts any longer, the president indicated that it was time to force a decision.

The Tea Party movement expects the GOP to keep its promise of settling for nothing less than $100 billion in spending cuts this year and has pledged to hold Speaker John Boehner accountable if those cuts aren’t made. Boehner promised to deliver the “largest spending cuts possible,” but doesn’t appear to believe that reaching $100 billion is in the realm of possibility.

To date, Democrats have agreed to something between $33 billion and $73 billion in spending cuts, depending on who is doing the counting. Republicans say the former figure is accurate, while some Democrats – including the president – insist that the latter is true. Fiscal conservatives should be encouraged that the culture of Washington has changed enough in the short term that the argument is about how deep spending cuts should be, not whether cuts are desirable. Everyone outside of hard-core leftists understands that government needs to kick its spending habit. The question now is how meaningful those cuts will be.

Republicans also unveiled their long-term budget plan, which aims to cut spending by $5.8 trillion over the next ten years and to reform the tax code. Under the plan that Ryan outlined on Tuesday, tax rates would top out at 25 per cent for both individuals and corporations. Ryan said that many tax loop-holes would be closed as well if the plan is adopted. Democrats pounced on the proposal, invoking the specter of class-warfare.

Representative Chris Van Hollen, the ranking Democrat on the House Budget Committee, called the GOP plan a “rigid ideological agenda that extends tax cuts to the rich and powerful at the expense of the rest of America.” Republicans counter that simplifying the tax code and cutting government spending are essential to America’s long-term economic health. Currently, federal government spending consumes about twenty three per cent of the overall United States economy. Ryan said that the GOP blueprint would reduce that to about twenty per cent by 2015 and to fifteen per cent by 2050.

It’s hard to see how Republicans and Democrats could get together on a long-term, sweeping proposal like Ryan’s when lawmakers don’t seem able to agree on a budget that covers a single year of government operations. If the two sides can’t find some common ground by Friday, the dreaded phrase “government shut down” comes into play. That would be a double edged sword for both sides.

Hard-line fiscal conservatives won’t be much bothered by a federal government shut down, but most of the rest of the electorate wouldn’t be happy. Senator Chuck Schumer (D – NY) said that if a shut down occurs, it will be the Republican Party’s fault. “A deal with $33 billion in spending cuts is right there for the taking,” Schumer said. “But the House leadership will need to stand up to the Tea Party.”

President Obama is ostensibly taking the high road on the issue -- or at least positioning himself as such. “I don’t think the American people are interested in blaming somebody” for a shutdown, he said. They rather expect solutions. The president's message is upbeat, saying that the two sides are closer than ever to reaching a compromise. Boehner was not as positive following meetings with Obama and Senate Majority Leader Harry Reid. In Boehner’s view, neither Obama or Reid have learned much from the last election.

The next few days will decide the issue, perhaps for a longer term than a week or two. Whichever side blinks first is sure to endure the wrath of their supporters. Yet, if neither side blinks at all, the situation may get even worse.