This Friday, the U.S. government could shut down for the second time since 1995. The Sunday news shows were all about the charges and counter-charges being levelled as to who should bear the blame for the possible shutdown of many government operations.
At issue is the current year’s budget. Two near-shutdowns have already been averted at the last minute since February, when Democrats agreed to cuts in the discretionary portion of the overall budget, which represents 12 per cent of the total budget. The Tea Party faction of the GOP wants $61 billion cut out of the total budget, while the Democrats seem willing to agree on half that amount. They have coalesced around Republican leader John Boehner’s proposed figure of $30 billion since shortly after the November 2 mid-terms. This is where the politics are being played out.
Looming in the background is an upcoming battle to extend the debt ceiling of $14.5 trillion later this month. Many Republicans, particularly those of the Tea Party variety, are threatening to vote against raising the ceiling if they don’t get the budget cuts they’ve requested. Should Congress refuse to raise the debt ceiling, it could have a significant impact on the bond and other financial markets. Many economists fear this could create panic in the markets.
This battle sets the stage for the 2012 election, where Republicans are hoping for a triple victory at the national level. The GOP is already blaming Obama for the budget impasse, claiming he is abdicating leadership. The Democrats, meanwhile, have argued they are willing to tackle the fiscal issue, but not from the uncompromising and ideologically extreme perspective of the Tea Party. Obama’s deficit reduction commission, Bowles-Simpson, drafted an ambitious blueprint of the course to follow. But without the endorsement of either the president or the Republican leadership, it remains just that—a blueprint. In the absence of a coherent plan, the whole debate has morphed into a game of chicken, much to the dissatisfaction of the voters.
Everyone in the political world agrees significant spending cuts are necessary. But what should be cut and by how much? That disagreement is compounded by battles over what to do on the revenue side of the ledger. Republicans are adamantly opposed to new taxes, preferring the nebulous subject of tax code reform. Democrats want to reform the tax code, raise new revenues, and repeal the Bush-era tax cuts on the very rich. It sounds a lot like the debate of the last two years.
It will take leadership and courage as opposed to calculation and tactics to do the people’s business. The deficit is close to 10 per cent of GDP and the debt is around 90 per cent of GDP. These figures, economists agree, are unsustainable. Everything should therefore be on the table: cuts to the Department of Defence, entitlement reform (medicare, medicaid, social security), tax code reform, everything.
These reforms cannot happen in a piecemeal fashion. Voters expect the president or the Congress or both to lead. In 1995, a Republican Congress led by House Speaker Newt Gingrich faced off against Democratic President Bill Clinton in what has since been interpreted as a win for Clinton and a factor in his reelection in 1996. Whomever wins this latest battle could very well end taking the 2012 election as well.
[John Parisella is currently serving as Quebec Delegate-General in New York City]