Making sense of the federal budget deal
Updated at 3:50 p.m. on 04/11/11
At the 11th hour, leadership struck a budget deal to avert a government shutdown Friday, April 8. But that’s last year’s budget—and it’s six months overdue.
WBEZ’s Jason Marck spoke to Charlie Wheelan, a senior lecturer at the Harris School of Public Policy at the University of Chicago, on Monday’s Eight Forty-Eight to make sense of the ongoing budget battles in Washington. Wheelan franed the last-minute line-item talks in terms of a household budget.
“Imagine you and your spouse have been up all night with all the receipts; you’ve argued, you’ve done the math and at the end of it, the morning light comes up and you realize that all you’ve managed to do is pay the minimum balance on your credit card,” Wheelan explained.
But at some point, Wheelan said, it dawns that [you] cannot actually pay the full balance on the card much less a car or mortgage payment. Putting off payments month after month is about where the federal government is on its own balancing efforts, Wheelan explained.
By failing to pass a budget last year, Democrats yielded considerable leverage to the newly-appointed Republican majority in the House. That said, Wheelan explained that it’s the GOP tail—the Tea Party—that’s wagging the dog of the Republicans.
“[John] Boehner had to deliver something to this vocal and influential and winning in November piece of the party,” Wheelan said. Further, Wheelan observed that the Tea Party is different than tails of yore: It’s organized, it got leadership and it’s got a mandate from voters. And so it starts to look like a coalition government similar to those in Italy or Israel.
The next big item of the docket is another sizable leverage point: The debt ceiling is a cap set by Congress on the amount of debt the federal government can legally borrow. The United States is unique, Wheelan explained, in that Congress can say “no” to more borrowing. The problem is, the U.S. is consistently running deficits and needs to add to its tab in order to pay off said deficits and the previously due Treasury debt. Were Congress to refuse raising the roof, the U.S. could potentially default on its debt—a threat Wheelan called “quite serious.”
A battle on the debt ceiling is the latest opportunity Republicans seized in order to to hold the [Obama] administration’s feet to the fire.
“The Treasury bond is the gold standard (not literally) of the financial system. And if there’s even a whiff that people are not going to get their money back or that system is going to be disrupted then there’s going to be widespread concern, if not panic,” Wheelan warned.
But all of this, Wheelan said, is just prelude to the much larger conversations this country must have in regards to entitlements and health care and so on. In the nearer term, members of Congress must return to the negotiating table to vote on a 2012 budget. Both parties have what Wheelan described as “glaring blind spots.”
“The blind spot on the Democratic side is that we can just keep doing what we’re doing and it going to be OK—we cannot,” Wheelan said. If members care passionately about entitlement programs, he went on to say, they must fix the programs to sustain them—a framework for raising the retirement age to save Social Security has not been drawn nor has a system to contain the cost of health care.
“The blind spot on the Republican side is this almost theological aversion to tax increases,” Wheelan observed. He added that he’s not seen any thoughtful observer who believes the United States can dig itself out of a fiscal hole without some sort of tax increase.
Wheelan called the recommendations given by the president’s bipartisan deficit commission in the December Simpson-Bowles report “the perfect starting point” for the current discussions. But the plan was stifled by a lack of support from the people who ought to have been behind it.
“President Obama’s reaction was tepid at best. Paul Ryan was on the committee, voted against the recommendations and so it was not beginning of that discussion that it should have [been],” Wheelan lamented.
But at least part of the blame, Wheelan said, falls on the American people in that taxpayers are not fully prepared for the kind of sacrifice required.
On legislative issues of this size and scale Wheelan said a strong executive voice is required. Ryan has provided that voice on the Republican side, whether people like his plans or not. President Obama is expected to deliver a prime-time speech Wednesday on deficit reduction. However many, including Wheelan, feel he’s a bit late to the party.
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