Are these The Last Days? Must we Repent Because the End is Near? Or heed the warning that The Wages of (Fiscal) Sin is Death?
It may seem that way before we get through this calendar year, but we should be OK if we hold on and keep our nerve. We will need to do that because, regrettably, our nominal leaders will be running off the track on a regular basis, and predictions of disaster will be daily media fare.
Here is how I expect it to turn out.
Reducing debt and deficits: This became Topic A after Tea Partiers grabbed public attention and a piece of power last November. They did not do this in a vacuum. They did so because short-term deficits and long-term debt pose a great threat to our financial/economic stability; voters and taxpayers properly want action to reduce them.
The Tea Partiers' strength became particularly apparent last Thursday (April 14), when enough Republican House members voted against the short-term budget deal, negotiated between Speaker John Boehner and President Obama, that Boehner was forced to round up House Democratic votes to gain the bill's passage. Rep. Steny Hoyer, the No. 2 House Democrat, voted for the package himself and helped Boehner get the additional votes he needed. (Hoyer increasingly is displacing the House Minority Leader, Rep. Nancy Pelosi, as the go-to Democrat in that body).
Tea Partiers were particularly inflamed because, the night before, Obama's presentation of his long-term deficit-reduction proposal — to counter that put forward earlier by Rep. Paul Ryan — had been surprisingly sharp-edged and partisan. They saw it more as an Obama campaign-kickoff speech than a sober presentation of an agenda. (Boehner, Ryan, and other mainstream GOP leaders were put off as well; Obama had invited them to his presentation and, then, blasted them publicly in it rather than offering olive branches).
On the other side of the political spectrum, many liberal groups are angry regarding spending and program cuts proposed by Obama. The AFL-CIO Executive Council, which includes presidents of most major unions, reportedly vented against Obama in its Thursday meeting, objecting in particular to spending cuts and to Obama's embrace, after long delay, of a trade deal with Colombia. Liberals also are restive about continuing U.S. commitments in Iraq and Afghanistan and, now, the new one in Libya.
The turbulence associated wtih the last-minute budget deal will seem modest compared to that which will take place within the next 30 days, as the $14-trillion-plus national debt will hit a place where Congress must act to lift the debt limit. Both Democrats and Republicans in the past have voted at various times against lifting the limit. Obama himself did it as a senator. But, this time, there will be no fooling around. Boehner and Senate Minority Leader Mitch McConnell both would like to lift the limit with a minimum of tumult, keeping the action separate from ongoing deficit-reduction debate. But enough of their GOP flock are demanding fresh deficit reduction — on a larger scale than the $38.5 billion in the recent budget deal — that Boehner and McConnell will have to get such concessions as part of the debt-limit lifting or risk mutiny among their troops.
A so-called "government shutdown," threatened before the recent budget deal, would have been brief and without real effect on the U.S. economy or longer-term provision of government services. A failure to lift the debt limit, however, would have international financial repercussions and raise questions of default.
So, the debt limit will be lifted — but only after confrontations far nastier than preceded the recent budget deal.
Then debate will move to the next fiscal year's budget and the competing Ryan and Obama plans for longer-term deficit reduction.
Dueling plans and visions: The two plans both would reduce federal deficits but make only modest dents in long-term debt — depending on the state of the economy over the next decade. As you might expect, the Ryan Plan stresses spending cuts, the Obama plan tax increases (mainly focused on upper-income taxpayers).
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