Greg Ip

Articles by The Economist’s U.S. Economics Editor

Averting a shutdown: Continuing irresolution

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A rare, but limited, bipartisan effort

Mar 23rd 2013 | WASHINGTON, DC |From the print edition

[Greg Ip] ORDINARILY, merely keeping the federal government from shutting down would not be cause for congressional self-congratulation. But the workmanlike and bipartisan fashion in which the Senate agreed to keep the federal government funded was a welcome respite from two years of nonstop partisan fiscal war. Of course, it fails to address any of the government’s longer-term budget issues, but there is nothing new about that.

On March 20th the Senate passed a so-called “continuing resolution” that will pay for discretionary programmes for the rest of fiscal year that ends on September 30th. (The other part of the budget, mandatory programmes, or entitlements, do not require annual spending authorisation, remaining in force unless they are modified.) As The Economist went to press it was headed to the Republican-controlled House of Representatives which had previously passed a broadly similar bill. Passage of the resolution therefore looked likely, though last-minute hiccups can never be excluded in Washington.

Discretionary programmes, which represent only about 34% of federal spending (about $1.2 trillion) including defence, education, child care, justice, border security, air traffic control and food inspections, must be authorised each year. Without an extension, many government agencies would therefore have to suspend business after the current continuing resolution expires on March 27th. Unlike a failure to raise the debt ceiling, which would call the government’s ability to service its debt into question, such a shutdown would not be a disaster. But it would be disruptive, and it would reinforce Congress’s reputation for incompetence.

The most heartening aspect of the Senate bill was that it was the product of old-fashioned negotiation within Congress, in particular between Barbara Mikulski, the Senate Appropriations Committee’s Democratic chairman, and Richard Shelby, its top Republican, which helped garner broad bipartisan support.

It helped that the bill was not too ambitious. It leaves in place the “sequester,” a deficit-control measure passed in 2011 that slices 8% from defence and 5% from other discretionary programmes this year. Barack Obama had pleaded without success to replace the sequester with a mix of higher taxes and targeted spending cuts. The Senate plan funnels more money to some programmes such as child care for low-income families, scientific research, food inspection and cyber-security, and gives bureaucrats a bit more flexibility in allocating money. But increases in one place must be offset by cuts elsewhere.

On the bigger questions of taxes, entitlements and stabilising the debt, the parties are as divided as ever. Even as they worked to pass this year’s funding, they were pushing radically different budgets for the next fiscal year. They must also raise the debt ceiling by the summer to avoid default on federal bills. But at least they have demonstrated that not all disagreements must be settled on the battlefield.

The original article is linked here.


Written by gregip

March 21, 2013 at 9:42 am

Posted in Uncategorized

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