By Clive Crook
Published: February 20 2011 19:20
Washington is quarrelling its way to a government shutdown, but not to a remedy for its fiscal problems. The reason is simple. Despite the noise and fuss, few politicians in Washington care that much about cutting public borrowing. They care about other things far more, and it might take another financial calamity to change their minds.
They are working on that.
Barack Obama has explicitly said that he does not care about long-term public borrowing. Having no proposals to deal with the problem is now official White House policy. There is no other way to interpret the budget the president sent to Congress last week. Under this plan, the full-employment fiscal deficit hovers for a while at about 3 per cent of gross domestic product later this decade, then explodes under pressure of rising spending on Medicare and other entitlements.
Let us be fair about this. It is not as though the president actually opposes deficit reduction. His budget does include a temporary and very partial spending freeze at historically elevated levels. If Congress comes up with a plan, he says he will definitely think it over. But his overriding priority is re-election in 2012. This rules out taking the lead on budget discipline. Fiscal meltdown between now and the election is unlikely, he calculates – this is the crucial judgment – so why expose yourself now by proposing a higher retirement age, say, or higher taxes for all Americans?
Fiscal lassitude must look especially appealing to Mr Obama when he considers the antics of the Republican-controlled House of Representatives. There too, cutting long-term borrowing is the last thing on anybody’s mind.
Under the influence of the recent influx of small-government zealots, the Republican majority cares first about hacking indiscriminately at short-term non-entitlement spending (thus ignoring both the spending categories that matter and the still-fragile state of the economy), second about blocking tax increases of any kind under any circumstances, and third about getting Mr Obama out of the White House. Public borrowing is something they deplore, but not as much as big government, and not as much as taxes.
Improving things still further from the White House’s point of view, the Republican party is split. The newcomers are full of zeal and refusing to take direction from the leadership, which by comparison has started to look moderate. On Saturday, the House passed a bill to authorise public spending beyond March 4. John Boehner, the House Republican leader, was forced to adopt much deeper cuts for the rest of this fiscal year than he first proposed – knowing, like everyone else, that the Senate and the president will not go along.
The Grand Old Party’s small-government fanatics almost boast about their lack of judgment. Public spending is public spending: what more do you need to know? The House just voted to slash competitive grants to improve low-performing schools, previously backed by the Republican leadership. It has voted to deny higher funding to the Securities and Exchange Commission, so that its new responsibilities under the financial reform act cannot be properly discharged. Really, the better the purpose, the better it proves your small-government seriousness to defund it. Democrats are delighted.
To measure Washington’s insincerity on public borrowing, look at what is going on in the states. There, the fiscal crunch has already arrived, and painful decisions can no longer be postponed. It is unsurprising that many governors, Democratic and Republican alike, look so much more serious than the artistes in the District of Columbia. They have no choice. They have reached the limits of their borrowing capacity – and, to make it worse, they know that raising state taxes might cause labour and capital to emigrate.
Republican governors such as Chris Christie in New Jersey, Mitch Daniels in Indiana and Scott Walker in Wisconsin face the same immediate fiscal challenge as Democratic governors such as Jerry Brown in California and Andrew Cuomo in New York – and their responses are perforce much the same. They are squeezing services severely and confronting the public sector unions that have forced pay, benefits and other terms of service out of line with private sector equivalents.
These efforts are meeting resistance, to put it mildly. Public sector workers in Wisconsin began huge protests at the end of last week, drawing national attention. What is interesting, though, is that the governors have come to a cross-party consensus about the measures that are necessary, and up to a point see each other as allies. That helps them do their job. Also, the ones who have been most forthright in explaining the fiscal facts of life to their constituents – especially the splendidly in-your-face Mr Christie – are winning respect for it beyond their states.
A troubling thought for Mr Obama, maybe, but for the moment the farce in Washington serves his purposes. Let the House GOP get on with it, the president’s advisers are telling him: keep the spotlight on them, and watch swing voters flock back. If we are really lucky, thinks the White House, the new continuing resolution will fail (remember it must pass House and Senate, still controlled by Democrats, in the same form). The government will have to shut down, as it did in 1995, financial markets will go crazy and it will be the Republicans’ fault.
Avoiding a fiscal meltdown would be good for 2012 purposes. Having one that could be blamed on Republicans would be perfect. What a way to run a country.
Copyright The Financial Times Limited 2011.
0 comments:
Publicar un comentario