StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



2011-2012: Can You Spell Federal Budget Gridlock?

25 Aug 2010
Posted by Stan Collender

Matt Miller's column in today's The Washington Post has to make you ask, "What about the budget?" After two years of demands, recriminations, and demagoguery galore about the budget deficit, national debt, and fiscal policy in general, won't dramatic political changes like the ones pollsters are predicting will happen in this election inevitably lead to massive changes in what the federal government spends and taxes?

Not a chance.

Assuming there are no big changes between now and election day (that is over just 10 more weeks), Republicans either will have narrow majorities in one or both houses of Congress or the Democrats will have smaller majorities in the House and Senate than they have now.  In general, that's not a situation conducive to compromises, cooperation, and large changes.

This especially will be the case in the political environment that will exist over the next two years.  The likely success of the obstruction politics the GOP has practiced will encourage Republicans to continue it as the big prize -- the 2012 presidential election -- gets closer.  It will also make it all but impossible for those representatives and senators who want to switch to a more accommodating mode after the election to do so.  If the Democrats retain control of the House or Senate, the GOP goal will be to obstruct Obama/Democrat initiatives.  If the GOP is in control, the plan will be to force the president to veto Republican majority-produced legislation as often as possible.  In almost all cases, the votes to override any vetoes won't exist and little will be accomplished.

If there is a GOP takeover in the Senate, Democrats are likely to practice the same you-need-60-votes-for-everything-you-want-to-do behavior that Republicans have used so successfully.

Budget-related issues will be ground zero for this situation.  Try to imagine spending or revenue changes being considered in this environment and ask yourself how much of anything -- stimulus, deficit reduction, the deficit reduction commission's report (if there is one), budget process changes , Medicare and Social Security revisions, new Pentagon priorities -- will get done.

Assuming the economy grows at the modest levels currently being assumed, that will leave the budget deficit at baseline levels through at least 2012 and probably 2013 as well.  The good news is that it will hover around $1 trillion, which would be well below current levels.  The bad news is that it will hover around $1 trillion, which would be way above the level the political system will be able to handle.

In other words, the demands, recriminations, and demagoguery galore from the past two years will continue...and then some.

You forget the Bush sunset provisions

If there is gridlock, then the budget will benefit from the lapse of the Bush tax cuts. They are after all in the baseline.


Unfortunately this is no time

Unfortunately this is no time in history for game playing. It looks as though the American public is going to have to start doing the job of their government, for our government, in order to keep things from falling apart...especially when it comes to the entitlements which are so quickly falling away.


Recent history belies this

Recent history belies this entire post. Despite the most overwhelmingly partisan Congress in memory, the budget process has broken down even by recent standards.

To wit:

We have no budget reslution for the first time in decades.

The House has passed only three approps bills and the Senate none with only one month left in FY 2010.

Things were actually smoother in past years when we had a much more mixed government.





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