The Budget Crisis Is Over (Temporarily), But Another Is Coming Soon

Each house passed a budget for FY 2014. Those budgets were miles apart but neither house showed any interest in negotiating a joint budget resolution. Negotiations are for sissies. Modern politicians prefer a fist fight.

As the new fiscal year approached, Tea Party House Republicans announced that they would not vote for a resolution to keep the government operating unless Obamacare was repealed. That Tea Party bloc was large enough to prevent the Republican leadership from passing a bill without its support.

Along with a major share of the blame for initiating the crisis, the group earned the title of “Suicide Caucus” because those members were willing to take down the government, and, later, to see it default. “Homicide Caucus” would have been more appropriate, because any sacrifices would have been made by their party and by the country, not by them.

Next, a small group of Republican senators, the senate counterpart of the Suicide Caucus, joined the anti-Obamacare crusade. The Cruz filibuster reignited the fury of the Tea Party base. Tea Party energy not only reinforced the Congressional Tea Partyers. It also intimidated other House and Senate Republicans who had viewed the abrupt switch from the debt strategy to the Obamacare strategy as a loser from the start.

As usually happens, this non-negotiable demand bred contrary non-negotiable demands on the other side. The President and the Democratic majority in the Senate demanded a “clean” Continuing Resolution to finance the government their way in FY 14, and a “clean” debt ceiling extension. Instead of negotiating, each side succeeded in painting itself into its own narrow corner.

At that point, everybody had joined the Suicide Caucus. Nobody had a Plan B. Nobody wanted a Plan B. Each side deemed the other’s position unworthy of discussion. Both sides appeared suicidally content to have a partially non-operating government which might have to default on its obligations.

And then, suddenly, the pictured changed. No more shut-down; no more default, at least for a couple of months. There was, of course, no solution. The warring parties had only managed to push all the problems ahead a few months. They simply agreed to go to Conference on the ’14 budget, something they should have done in June.

We have been watching this long-running soap opera since well before Republicans regained their majority in the House in 2010. The Bowles-Simpson Deficit Commission began its work in April that year. On their clearer-thinking days, both parties agree that the goal is supposed to be a reduction in the US debt ratio, something along the lines of Bowles-Simpson.  Unfortunately, there are few clear-thinking days.

Although it remains the gold standard of budget plans, Bowles-Simpson failed. In 2011, there was a debt ceiling fight. The Joint Super Committee was formed, and failed. The sequester was triggered. In 2012, the “fiscal cliff” was narrowly avoided by an agreement on extending tax cuts and increasing taxes on high earners.

At every stage of this running battle, the solutions have been temporary. Crises have been averted, but only for a few months. No solutions have been achieved. Increasing debt continues to loom. Each catastrophe temporarily avoided has set up another a few months ahead.

Republicans took a political hit on the debt ceiling dust-up in 2011. They are taking another one today. The public still believes that Republicans are more culpable than Democrats. But, with both parties frozen in place, the public is having increasing difficulty assigning blame. Nobody is, nor should be, very popular in Washington these days.

After giving our economy, and our world reputation, a kick in the pants, the parties have delivered another temporary postponement.  Time is too short now for the grand compromise. But the policy makers could salvage something in this otherwise dismal year.

They could modify the sequester cuts, but off-set changes with cuts elsewhere. They could also establish a budget path forward to a targeted debt ratio of 60% in 10 years, using growth-oriented tax reform and reductions in the long-term programs that are driving the deficit /debt.

At this point, the best that can be expected is a future target, a plan without details, and without enforcement. But that’s far better than we have achieved in the past five years. Congress is not very good at keeping its promises, but a 10-year target would be worth trying.