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The Coming Budget Battle

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The mid-session budget review, says budget expert Stan Collender, suggests one main thing: Next year's budget "will start the biggest fight over the budget and fiscal policy in U.S. history." Collender thinks the battle will dwarf that of the '80s, which produced the Gramm-Rudman-Hollings Balanced Budget Act and nearly created automatic cuts to government spending. He thinks it will be bigger than the fight that created the Budget Act of 1974 and re-created the entire congressional budget process.

He thinks this for two reasons: First, "partisanship now is greater than during any of those fights," which means it's harder to get anything done. Second, it will be an election year. And third, "the problem" — that is to say, the size of the long-term deficit — "is much more intense."

The obvious rejoinder is that there will be no fight, because Obama won't propose anything difficult or controversial. After all, it's an election year, and the pitch of partisanship ensures that Republicans will happily roast the Democrats for trying to make any difficult choices.

Collender thinks this is wrong for two reasons. First, the Democrats with the most difficult reelection battles are the freshmen elected in Republican-leaning, fiscally conservative districts. They'll need something to show for their time in Washington, and along with the Blue Dogs, they may well be able to get it.

Second, and arguably more importantly, the markets are increasingly nervous about the size of our long-term deficits, and without credible action to reduce them, interest rates could rise, choking off the recovery. That would be the worst possible outcome for the administration, as nothing will be as politically potent as tangible evidence of recovery, and nothing will be as damaging as a return to recession. As Collender sums it up, "proposing difficult reductions next year will be difficult and dangerous. But so will not doing them."

Photo credit: By Sean Donnelly — Bay Area News Group Via Associated Press

By Ezra Klein  |  August 25, 2009; 1:11 PM ET
Categories:  Budget  
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Comments

Yippy... budget cuts in the middle of a harsh recession that's far worse than the green shooters think. It's 1937 all over again!

It's amazing how long-term deficits weren't a problem when Bush was doubling the size of the national debt.

John

Posted by: toshiaki | August 25, 2009 1:47 PM | Report abuse

or aren't a problem now that Obama is spending worse than Bush did? wow.

Posted by: atlmom1234 | August 25, 2009 2:48 PM | Report abuse

washington needs to cut taxes, and stop spending it's as simple as that.
Of course, it won't happen. My congresspeople are quite happy to put their names on projects (pork) that they get money for in my area. And I look at it and think: wow - what a waste of money. If only the more local govts were able to raise the money for such and such project, they wouldn't have had to go to washington to get the money - where the project then probably cost more than twice as much.
Cut cut cut - until you spend what you earn, or even less, and send the money back to the taxpayers. Yes, I do believe this. Those people in DC have no idea what they are doing - how they are choking companies (and if you think companies are evil, well, um, those are where the jobs are - but the companies can't hirepeople if they can't do their business because of govt regulations, etc). Stop spending my money!

Posted by: atlmom1234 | August 25, 2009 2:51 PM | Report abuse

This pits Obama and his reelection in 2012 against the dems in the mid term elections. A second stimulus would avoid the double dip recession and help out obama, but the relentless litany of deficits and debt from the repiglicans will make vunerable dems in conservative districts losers in 2010. Hobson's choice, but a second stimulus with no tax cuts (in fact with higher marginal rates for those making over 300k, 500k and 1000k to pay for it) would actually make the economy better in 2012.

Posted by: srw3 | August 25, 2009 2:51 PM | Report abuse

@ atlmom1234

Just for accuracy, Bush ran up deficits while the economy was growing, the time when we should have been building up our reserves for the recessions in the future. Remember, Clinton left the bushies with a SURPLUS and surpluses going into the future! Bush left Obama with debt and deficits as far as the eye can see. Instead he squandered revenues on tax cuts for the wealthy and wars of choice. Care to defend that?

Also, where is your plan to pay for medicare part D and the war in Iraq? Republicans should be asked every day where the money to pay for that program and that war should come from? Remove the log from your eye before removing the twig in Obama's.

Posted by: srw3 | August 25, 2009 2:57 PM | Report abuse

"It's amazing how long-term deficits weren't a problem when Bush was doubling the size of the national debt."

I made this argument many times on the Interweb during the past nine years so one more time won't hurt. Budget deficits (and national debt) are only important in relation to the size of U.S. GDP.

In general, if deficits are less than 5% of GDP and total U.S. government debt is less than 50% of GDP we can pretty safely assume there won’t be much fallout in the bond markets and the U.S. can continue to use deficit financing.

Annual Deficit (Bush) – 1.6% to 3.3%
Total Debt (Bush) – under 70% of GDP

Annual Deficit (Obama) – over 10% projected for FY09
Total Debt (Obama) – 100% projected by FY10

Do you see why this is more of a problem under Obama? In Obama’s defense, you cannot hold him accountable for FY09 because it was such an anomaly but he owns FY10 and beyond whether he likes it or not.

Posted by: kingstu01 | August 25, 2009 2:58 PM | Report abuse

“Instead he squandered revenues on tax cuts for the wealthy and wars of choice. Care to defend that?”

Please take a look at history and remove your tin foil hat. With few exceptions (Clinton being one) the U.S. has run a deficit (which adds to national debt) every year for the past 60 years. This is not normally a huge structural problem when deficits are below 5% of GDP and total debt is below 70%.

The problem is…Obama is running deficits above 5% and total debt is expected to rise to near 100%.

Posted by: kingstu01 | August 25, 2009 3:06 PM | Report abuse

@kingstu01

Basic question:

Where is the republican plan to pay for their budget busting wars and programs?

Answer: ????? (crickets...)

Obama has to run higher than optimal deficits to do counter cyclical spending so the economy doesn't go into depression.

The point is that there would be enough money to pull us out of this recession without deficits above 5% if Bush hadn't left Obama with the bills for his spending spree on his rich friends (tax cuts for the wealthy), lack of oversight on the financial markets and bizarre financial instruments that all went belly up, and an unnecessary war of choice.

You are wearing the aluminum headgear my friend.

Posted by: srw3 | August 25, 2009 3:48 PM | Report abuse

What's funny is that the numbers you roll out such as 5% of GDP and total debt is below 70% / above 5% and total debt is expected to rise to near 100% always get rolled out after the GOP has run up the debt in their years, and just in time to reign in / kill off any Dem programs. Then when we find out that the numbers don't choke off the country during the Dem Admins, the GOP comes back into power to run them up higher and create a new set of numbers.

It's all predictable. We were predicting that "deficits" would magically become a rallying cry in 2009 as soon as a Dem's were in power and the GOP was grasping for props to choke them off.

Tin foil. Yep, I remember that one back during the Authorization for Use of Military Force. It was great smack back then too.

John

Posted by: toshiaki | August 25, 2009 3:49 PM | Report abuse

@kingstu01

"Do you see why this is more of a problem under Obama? In Obama’s defense, you cannot hold him accountable for FY09 because it was such an anomaly but he owns FY10 and beyond whether he likes it or not."

False, false, false!

We are spending on Iraq and Afghanistan for at least the next 8 years and medicare part d for the foreseeable future. These are expenditures with no revenue to to pay for them. This is on the repiglicans. They were in control for the last 8 years when all of this started. How much of the deficit is from programs that Obama started? Less than 20%

Posted by: srw3 | August 25, 2009 3:54 PM | Report abuse

@kingstu01

Please take a look at history and remove your tin foil hat.

BTW, Vietnam, Iraq and Afganistan were the first wars that didn't come with a funding stream of higher taxes. WWI, WWII, Korea, all had higher taxes to pay for the additional govt expenditures. Why no war bonds for Iraq?

Posted by: srw3 | August 25, 2009 4:01 PM | Report abuse

How can you argue with a fact? The federal government has run a deficit in 50 of the last 60 years.

http://www.usgovernmentspending.com/federal_deficit_chart.html

I realize it’s easier to drink the Kool-Aid when you are ignorant of the facts but now you don’t have that luxury. U.S. federal deficits in 50 of the last 60 years…it is not up for debate. You can’t blame the war in Iraq for a deficit from 1962.

BTW, a straw man is a tool for weak minded fools so please restrict your comments to my first two posts.

Posted by: kingstu01 | August 25, 2009 4:57 PM | Report abuse

Was anyone disputing the fact that we've run a deficit in 50 of the last 60 years?

The point being made is that this was ignored under RR and GHWB, was used to hit Clinton over the head with when he inherited RR & GWHB's, was ignored again when GWB & Friends looted DC for 8 years, and now suddenly is an issue again when Obama takes over.

You haven't rolled out any evidence that the deficits are more of a problem under a Dem Admin than a GOP admin. There really isn't any evidence that Obama's FY2010 budget is the straw that's going to break the back of the US debt structure.

If it is, then let's just revoke those Bush tax cuts and raise the top marginal rate up to 50% and pay it off. If the GOP and the Debt Concern Trolls are worried about it, let's tax the looters of the last decade to bring it down.

John

Posted by: toshiaki | August 25, 2009 5:21 PM | Report abuse

@kingstu01

kingstu01 Can't answer a simple question:

How will repiglicans pay for their war, tax cuts, and medicare part d?

Answer: ?????

Still waiting....

Posted by: srw3 | August 25, 2009 6:21 PM | Report abuse

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