US budget showdown: the politics of pantomime
For all the attempts to talk up the budget clash as a great historical drama, in truth it revealed the pathetic state of American politics.
Last Friday, it looked like money for US government agencies would run out at midnight. But an hour before that deadline, congressional leaders and President Obama reached a budget deal that prevented a government shutdown and massive job lay-offs. The compromise cuts about $39 billion from federal spending this year.
Listening to the media coverage, it seemed like a great political drama was taking place. CNN showed a countdown clock, with the minutes ticking away ominously towards the shutdown at midnight. In reality, though, the whole thing was an example of the pathetic state of American politics. The Financial Times was right to refer to the shambolic last-minute deal-making as ‘banana republic machinations’.
Despite what the breathless news reporters said, this was not a battle over political principle. Yes, the US federal deficit is large, but this agreement was never intended to put even a small dent in it. Both parties had agreed to reduce spending, and the differences between them towards the end had boiled down to $1 billion or $2 billion, out of a total budget of $3,700 billion.
Following the deal, a beaming Obama said: ‘Today, Americans of different beliefs came together.’ Based on his enthusiasm, you could be forgiven for thinking that the agreement marked a landmark in American history. Of course it was simply the mundane business of government: passing a budget, something the federal government does every year. Not only that, but amid all the celebrations it is easy to miss the fact that the budget deal was well overdue, coming some six months into the fiscal year, and therefore this supposedly great achievement only sees them through another six months.
Rather than getting caught up in the ‘high-stakes drama’ of the ‘countdown to shutdown’, most Americans watched with bemusement and dismay. How could such a serious step – shutting down the basic institution of government, with significant implications for jobs and services – be risked when there was so little separating the two sides? The reality was that the brinkmanship was intended to sway both parties’ respective members of Congress, not the public at large. John Boehner, Republican majority leader in the House, wanted to prove to his Tea Party caucus that he was going down to the wire to obtain the maximum spending concessions; Harry Reid, Democrat majority leader in the Senate, wanted to cover his tracks by reassuring his liberal wing that he was not going to give in to Republican social policy issues, like the bid to defund Planned Parenthood.
That the politicians would subject the public to such a circus, just to bring their own members in line, shows how self-absorbed they are. Before the budget showdown, both parties in Congress were held in low esteem, with approval ratings of less than 20 per cent. The latest spectacle of politicians acting like juveniles will certainly not improve perceptions of Congress’s stature.
Of the two parties, the Republicans retained some semblance of coherence. Mostly united behind a push for spending cuts, they managed to set the agenda. But for all of Boehner’s self-congratulation afterwards, the cuts represented only a tiny percentage of the total budget. At the same time, because they were heavily focused on so-called ‘discretionary’ welfare spending, the reductions will disproportionately affect the poor and working class. In addition, the Republicans’ pursuit of issues that had nothing to do with the budget – like the ban on the financing of abortions in Washington, DC – made it appear that they were simply using the occasion to advance their pet projects.
The most ludicrous of Boehner’s claims was that the deal would help the economy. ‘We fought to keep government spending down because it really will in fact help create a better environment for job creators in our country’, he said. To date, businesses have not been holding back from hiring more because of government spending, and the relatively small cuts in the latest budget deal will have little or no influence on whether to create more jobs. While the Republicans are obsessed with cuts, they have no answer for economic growth; and if the economy doesn’t grow, even cuts in spending won’t come fast enough to reduce the deficit.
On the other side, the Democrats appear aimless and adrift. The fact that the 2011 budget took this long is a poor reflection on them: they had majorities in both Houses of Congress when this process should have been completed six months ago, so they only have themselves to blame for failing to come to agreement within their own party.
It is hard to know where Obama stands on these issues. At times he calls for ‘investments in the future’, but he also stresses that cuts are necessary, using the analogy of a family tightening its belt when times are tough. His initially proposed budget called for a $40 billion increase in spending, and then he ended up agreeing to a $39 billion decrease – a swing of $79 billion. To an objective observer, that would appear to be a defeat. And yet afterwards Obama pretended he had won. He called the deal ‘good news for the American people’ and boasted about ‘making the largest annual spending cut in our history’.
What is clear coming out of the budget agreement is that the Democrats are allowing the Republicans to set the agenda. No longer is there any talk about stimulus, even though Obama previously said the stimulus would be necessary until the economy fully recovered and unemployment came down to pre-recession levels. (Indeed, most economists think the US economy is not out of the woods, and have marked down growth forecasts as a result of the budget deal, because the economy has been so reliant on state spending.) Nor is anyone really talking seriously about Obama’s ‘investments’, like his half-hearted proposals to increase spending on infrastructure, high-speed rail and green-energy technology.
Instead, all the talk is about where to cut next. Obama and the Democrats have managed an incredible feat: they have made the Republican scaremongering bean-counters appear like courageous truth-tellers who are willing to tackle unsustainable deficits.
It now looks like there will be other occasions for ‘drama’ in the near future. First, there will be a vote on raising the national debt limit, which will probably occur sometime between mid-May and early July. Boehner is insisting that they will go down to the wire again unless ‘there is something really, really big attached’ to raising the cap – meaning further spending cuts. The White House is warning that not raising the debt limit would have ‘Armageddon-like’ consequences for the economy.
Second, a debate has started about the 2012 budget. Last week, Republican Paul Ryan unveiled the House proposal, and on Wednesday night Obama is expected to announce his counter-proposal. The 2012 process looks likely to drag on like the 2011 did, especially given that neither party will want to be seen to be conceding too much in the run-up to the 2012 election (which is a presidential one).
Some commentators are saying that the 2012 debate will be an improvement on the 2011 circus, because the proposals will address longer-term problems of affordability of ‘entitlements’ such as Social Security (national insurance) and Medicare (healthcare for senior citizens). Ryan’s proposal would replace Medicare with vouchers that would most likely not keep up with the cost of healthcare (the US has the most inefficient healthcare system in the world, with spending as a percentage of GDP nearly double that of the nearest major country). At the same time, Ryan calls for lower taxes, which, of course, would tend to increase the deficit. Obama is likely to announce an approach that favours a mix of tax increases and spending cuts.
While disagreeing on the means, it is clear that both parties agree on the end: austerity. Even though the costs of Social Security and Medicare are structural contributors to government deficits, a focus on them (and deficits generally) is myopic. At the moment, there is no fiscal crisis. The real issue that is neglected amid all the deficit discussion is whether the US economy can generate growth. With growth, the current deficits will be taken care of; without growth, the doomsday scenario that fearmongers peddle today could become a self-fulfilling prophecy.
Neither major party has anything of substance to say about creating growth in productive industries. Their consensus on austerity is mind-numbing and uninspiring. To be subjected to the spectacle of recurring pantomimes over budgets only adds insult to injury.
Sean Collins is a writer based in New York. Visit his blog, The American Situation, here.