Web Chat: Congress, the Federal Budget and U.S. Debt

As the threat of a government shutdown looms, expert Isabel Sawhill discussed the issues at stake and the status of the budget negotiations on Capitol Hill in a live web chat on April 6.

12:30 David Mark: Welcome to chat. Let’s get started.

12:30 [Comment From Paul: ] How close are we really to a government shutdown? Is a shutdown any more likely now that it has been over the past few months?

12:31 Isabel Sawhill: Really close. The deadline is midnight Friday but the bill is supposed to be posted three days in advance and it hasn’t been. So it’s looking increasingly as if the government will shut down although they could pull out a deal at the last minute and waive the rule about posting the bill.

12:32 [Comment From David McClurkin: ] What is the real impact of government shutdown? Is it no Social Security payments? Is it no Medicare payments? Or is it just Federal workers on furlough? Is anyone angry that our well-compensated House and Senate can’t seem to run our government like adults?

12:34 Isabel Sawhill: There will be essential programs and personnel that will be exempt and checks to Social Security recipients will continue to go out. But it won’t just be workers who are furloughed. Contractors will be affected, for example. And yes, most people are very angry! Aren’t you? I sure am.

12:34 [Comment From Eric: ] How is Rep. Paul Ryan’s budget different from other plans?

12:35 Isabel Sawhill: Ryan’s plan is pretty radical. It cuts spending by trillions but actually reduces taxes and pretty much exempts defense. That contrasts sharply with, say, the Bowles-Simpson plan which put everything on the table, but accomplished a similar objective in a much more balanced way.

12:36 [Comment From Jason: ] Can you comment on Ryan’s termination of the entitlement status of Medicare and Medicaid?

12:39 Isabel Sawhill: Technically, I’m not sure he actually ends their entitlement status but he does end their open-ended nature. Instead of paying directly for medical care the government would provide subsidized premium assistance so that the elderly could buy a plan on a private but regulated market exchange. Premium support can be limited so that health care spending growth is also limited. Medicaid would become a block grant to the states and would grow more slowly than now, being adjusted for population growth and inflation only.

12:39 [Comment From Marcus: ] Do you think Ryan’s budget proposal will be successful?

12:39 Isabel Sawhill: If you mean will it be enacted, the answer is absolutely not. The Senate and the President would never agree to it. But it will influence the debate.

12:40 [Comment From Wes: ] Isn’t this really a fight over a tiny percentage of the budget? Aren’t there bigger and fundamentally more important budget battles to come?

12:41 Isabel Sawhill: I think you’re referring to the 12 percent of the budget that’s non-security discretionary spending which is what the current 2011 fight is about and what’s threatening a shutdown. And yes, that’s tiny. So all the more reason to wish that members of Congress could act like adults and just get it done.

12:42 [Comment From Frank J (DC): ] When do we expect the debt limit to expire? What happens if Congress can’t approve an increase?

12:43 Isabel Sawhill: That’s uncertain but probably some time in May.

12:43 [Comment From Bill in Va.: ] What if the government shuts down this weekend (and beyond) and people don’t really care? I mean, if Tea Party activists and their GOP allies have successfully demagogued the issue to the point where the majority of Americans think it’s fine either way, then won’t the result be … good thing? Or to ask another way, how will we know whether it’s good or bad to have all but the most essential services off?

12:45 Isabel Sawhill: Interesting question but I think it will be very disruptive and inefficient and ordinary people will feel the effects if the shutdown lasts for any length of time. Passports won’t get issued. National Parks will be closed. Student loans won’t be processed, etc. But I think there’s such anti-government feeling out there right now, that maybe people will be more tolerant than I think.

12:46 [Comment From John: ] How is it possible to estimate the cost of a shutdown? Isn’t that the pro-government side just making numbers up?

12:46 Isabel Sawhill: I don’t think anyone knows the costs for sure so estimates could be wrong. Whether they’re biased is another question. I guess it depends on the source.

12:46 [Comment From Darrin: ] I’ve been hearing Paul Ryan invoking your colleague Alice Rivlin a lot as a way to put a bi-partisan gloss on his budget plan. Do you think that’s fair?

12:48 Isabel Sawhill: Well, she did co-sponsor a plan with him, but she certainly doesn’t agree with all of what he’s proposing now — far from it. What she would argue is that public health care spending is on an unsustainable trajectory and something like what Ryan is proposing for Medicare and Medicaid is worth considering. But she would want that to be part of a much more balanced package, like the one she put out with Sen. Dominici.

12:49 [Comment From Steven P.: ] Is there still a “debt ceiling crisis” and if so when does it occur and what do you think this Congress can do about it?

12:50 Isabel Sawhill: Absolutely. It’s a huge issue and makes a government shutdown seem trivial by comparison. If we can’t borrow, we could have a financial crisis or an aborted recovery.

12:50 [Comment From David McClurkin: ] Angry, yes, but just who to hold accountable next cycle?

12:51 Isabel Sawhill: I think you have to be the judge of that after watching the negotiations. My own view is that Democrats have agreed to half the cuts proposed by the House Republicans but the Republicans are now upping the ante and moving the goal posts.

12:51 [Comment From Rose Sesak: ] Is there any productive budget exercise at work in this verging on the brink of a shutdown? It appears to me to be solely political gamesmanship.

12:52 Isabel Sawhill: Basically, I think you are right.

12:52 [Comment From Amanda Bartlett: ] If Congress came to its senses and asked you for advice, what would you recommend?

12:54 Isabel Sawhill: Quickly agree to the compromise that involved cuts of about $33 billion for the remainder of this fiscal year and get on with the more important stuff which is taxes and entitlements. The Bowles-Simpson plan would be a good starting point and I applaud the Senators who are trying right now on a bipartisan basis to find common ground around this kind of plan. The House is the problem and especially the Tea Party wing.

12:55 [Comment From Steven P.: ] If essential programs and personnel will remain on the job … what’s there to be angry about? That suggests that all the rest are non-essential, and isn’t that what we want to arrive at? Cut non-essential government?

12:56 Isabel Sawhill: Well, it will be interesting to see if the public thinks that some of the things I mentioned before are things they can do without. Right now we seem to face a situation in which the public wants more than they’re willing to pay for. They do need to decide how to reconcile their desire for low taxes with their desire for various benefits and services.

12:57 [Comment From Ron: ] With the election coming up next year, is it likely that Republicans or Democrats are going to make cuts in the budget which would be unpopular with one group of voters or another?

12:58 Isabel Sawhill: No and that’s part of the problem. I’d love to see a President or another elected official bet his or her office on taking some unpopular steps.

12:58 David Mark: Thanks for joining us today.