A Two Year Budget: A Small Christmas Gift from Washington

United States Capitol

United States Capitol (Photo credit: Jack in DC)

While I have liberal leanings, I am more of a pragmatist than a liberal despite what my more conservative friends might think.  This blog is titled American Titanic because I think this nation is navigating through a thick field of icebergs which will likely become more dangerous  in decades to come.

However, much of the danger lies in our inability to steer the ship, some pulling left and others right.  Unable to pull together, we are propelled by our own momentum towards bleaker days straight ahead.

While it is a tepid agreement, the recent passage of a two year budget compromise worked out by Senator Patty Murray (D.) and Representative Paul Ryan (R.) is quite significant given the lack of bipartisan efforts on anything significant over the past few years.  Part of its importance is the bill was passed by a huge bipartisan majority in the Republican controlled House, where hardly anything passes except bills to repeal Obamacare over and over and over again.

Of course, a close look at the bill raises questions, reveals some fiscal smoke and mirrors, including supposed cuts to come later, and pleases no one.  But that’s the way it is with political compromises (for details see Ezra Klein at bottom of post).

Paul Ryan might benefit most from this bargain, especially when it comes to the next presidential election, as he has now shown an ability to get something through congress, while his likely fellow Republican senatorial contenders for THE BIG JOB  – Marco Rubio, Paul Cruz and Rand Paul – all voted against this deal, pleasing their base but also feeding into the naysayer image the Republican party has developed during the Obama years.   For a  Republican to win the White House in 2016 he will have to figure out a way to assuage the base while also attracting much wider support.   With the passage of this bill, Paul Ryan has shown an ability to do just that.

The value to us all is the bill reduces uncertainty in our economic climate in that we know the government will stay open for the next two years, and almost anything that shores up certainty is good news to the business community.   Even when it comes to the much maligned Obamacare, I conclude from various sources that most businesses believe they could thrive under Obamacare if they knew exactly what it is and how it will effect them.

Of course, there remains another bullet to be removed from the gun and that’s the potential stoppage in raising the debt ceiling February 7, or so.   While this raising used to be more or less a matter of course, the Republican tactic of making it a bargaining chip has been another cause of uncertainly since they took over the House in 2010.

From all the comments I’ve seen, they are demanding some kind of budgetary cut in spending in order to raise the ceiling once again, while also repeating the claim that we would be fools to default on our debts and cast doubt upon “the full faith and credit of the United States.”

Though that may seem illogical, their logic is while of course we must raise the debt ceiling, since our debt is our biggest problem long term it only makes sense to shave off a little spending in the process.  As such, they try to appear reasonable making President Obama seem unreasonable in his  unwillingness to negotiate.  If we all agree the debt ceiling must be raised per usual, there should not be any negotiating, but Republicans constantly gloss over that fact.   They believe, and I agree with them, that a majority of Americans like the idea (in the abstract) of less government spending and Republicans continue to play that card even when it doesn’t suit the rules of the game.

How that plays out could get interesting, but my guess is that some sort of deal will be made  whereby the Republicans can claim a spending reduction while the president can claim no important concessions were made.

This game has been played a few times since 2010 and the ceiling has always been raised, so perhaps this isn’t the big deal that it seems on the surface.   Maybe business people interpret it as only more political theater.   I hope so, but that assumes the key actors don’t get clumsy, fall over each other  and somehow ruin the play.   That really would ratchet up uncertainty to new levels.

But let’s not dwell too much on that until next year.

——————————-

P. S. – If you want a simple break down of the budget deal,  check out Ezra Klein’s summation in the Washington Post Wonk blog.  Also,  Treasury Secretary Jack Lew makes a plea for  settling the debt ceiling issue before February, for those who want to warm up for the next congressional episode of kabuki theater.

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