9/29/2013

Why You Should Pay Attention to the U.S. Budget Crisis

Judging from some of the reactions I’ve seen and heard over the last week, it’s clear that many of you are happily unaware of the ridiculous battles taking place in the United States Congress, or, if you are aware, don’t really understand what the whole fuss is about. Let me begin by saying that what is currently taking place is very, very serious, and even if you couldn’t normally give a hoot about politics, you should be paying attention right now.

(As an aside, some might accuse me of having some kind of partisan bias. While I do hold a preference for liberal policy prescriptions on a number of issues, on this particular issue it makes no difference what your political orientation is. On this issue, objectively, one side is completely to blame. My political leanings have absolutely no effect on my reading of this matter).

There are two main issues at stake. The first is the “continuing resolution”, which is basically a bill that authorizes the government to spend money over a certain period of time. The current one is about to expire, and if a new continuing resolution isn’t passed, many government agencies will be forced to shut down on Monday night.

Normally, passing a continuing resolution would not be a problem. The issue this time around is that the House of Representatives, controlled by Republicans, is refusing to pass a continuing resolution that does not remove funding for the Affordable Care Act, delay implementation of the law, or repeal individual portions of the law.

House Speaker John A. Boehner of Ohio headed to vote on the latest bill to link further government financing to a weakening of President Obama's health care law.
Source: The New York Times
Some people have defended this tactic. After all, isn’t the House of Representatives the lawful originator of spending bills? Why shouldn’t they be able to refuse to fund a law they don’t agree with, or use their control over the budget to extract policy concessions? But this logic only works if you support the House’s policy position. It is easy to imagine an equivalent scenario in which a Democrat controlled House refused to pass a continuing resolution that did not raise taxes on upper income brackets, or reduce military spending, or any other liberal policy you can imagine. I suspect no one currently defending the Republican House would defend these actions. Taken to its logical conclusion, whichever party controlled the House of Representatives could make any demands it wanted, and bring the government to a standstill if its demands were not met. It quickly becomes clear that this is no way to run a government, and that continuing resolutions should never have “demands” attached to them.

There is a normal political process for passing laws and setting spending levels. The House and the Senate both pass bills, which are then merged into a single compromise bill in a conference, and this bill is sent to the President to be signed. Through this process, the Affordable Care Act could be defunded or repealed, but it would require Republicans to control the Senate and the White House (or to have enough votes in Congress to override the president’s veto). In the 2012 election, Republicans failed to capture the White House or the Senate. Thus the Affordable Care Act cannot be repealed, defunded or delayed through the normal political process, and that should be the end of the story. What the Republicans are currently doing is attempting to circumvent this process by threatening to stop the normal operations of government unless they get policy concessions that they would be unable to get through the normal political process. This is both irresponsible and outright reprehensible, and even if your political philosophy is conservative, you should oppose the Republicans on this issue.

The second issue at stake, and by far the more important of the two, is the debt ceiling. The United States has a legal limit on the amount of debt it can take on. In practice, this debt ceiling serves no purpose, because annual expenditures are agreed upon in bills that have no relation to the debt ceiling, and Congress frequently passes appropriations bills that compel the government to exceed the debt ceiling later in the year. Indeed the debt ceiling has constantly been raised 99 times since 1940, or an average of once every nine months. Usually this is done as a matter of course, but in 2011 Republicans seized on the idea of refusing to raise the debt ceiling unless they were granted policy concessions. Again, these were concessions that they would have been unable to achieve through the normal political process.

Using the debt ceiling as a policy lever is particularly insidious because the consequences of breaching the debt ceiling would be disastrous. If the United States were unable to borrow, it would immediately become unable to pay its bills. The nation’s credit rating would be destroyed, interest rates would soar, and the nation could easily slip into another recession just as severe as the one in 2008. Although the United States does have a huge amount of outstanding debt, financing that debt is quite cheap because investors regard U.S. debt as a sure thing. By refusing to raise the debt ceiling, the House of Representatives would force investors to price the very real (and entirely self-imposed) risk of default into their bond purchases, which would send bond rates soaring and make the cost of financing our debt far more expensive than it needs to be. This would actually increase the annual deficit by tens of billions of dollars.

It should be apparent that raising the debt ceiling is not a concession to anyone. It is a necessary part of keeping the government functioning. Decreasing our annual deficit and stabilizing the national debt is an important priority, but the debt ceiling is not a policy lever with which to achieve this goal.

What the Republican party is doing at this moment is reckless behavior completely unworthy of any governing party. Threatening government shutdown or an economic catastrophe unless President Obama and Senate Democrats accede to policy demands that Republicans could not otherwise obtain through the normal political process is despicable behavior, and no one, not even the most ardent right-wing voter, should support this behavior.

1 comments:

Nate Heckmann said...

Ezra Klein summarizes it best:

"This is all about stopping a law that increases taxes on rich people and reduces subsidies to private insurers in Medicare in order to help low-income Americans buy health insurance. That’s it. That’s why the Republican Party might shut down the government and default on the debt."

Post a Comment

All comments are screened. Spam and expletive comments will not be posted. Please be polite.