U.S. Budget Brinksmanship

U.S. Budget Brinksmanship

April 6, 2011

Author:	James M. Lindsay, Senior Vice President, Director of Studies, and Maurice R. Greenberg Chair

James M. Lindsay, Senior Vice President, Director of Studies, and Maurice R. Greenberg Chair

The specter of a federal government shutdown looms as the White House and Congress wrangle over a budget for the final six months of the current fiscal year. But as Democrats and Republicans scramble to meet Friday's deadline, even bigger budgetary battles are in the offing. How these clashes play out will signal--domestically and internationally--whether Washington can put its fiscal house in order and shape the battle for control of the White House and Congress come 2013.
The numbers separating the two sides on the FY11 budget are small. The White House and Senate Democrats have agreed to $33 billion in cuts. Speaker of the House John Boehner has proposed $40 billion in cuts.
Boehner has warned his colleagues that shutting down the federal government will help Democrats and hurt Republicans, just as it did back in 1995.
But House Republican hardliners aren't buying the argument. With Tea Party protestors shouting "cut it or shut it," they insist that standing firm is the best strategy politically and legislatively. As Representative Mike Pence (R-IN), a darling of the Tea Partiers, puts it, "sometimes, the most reasonable thing in the legislative process is to be unreasonable."
However this week's budget battle turns out, more spending fights are on the horizon. Next up is whether to raise the ceiling on the national debt. The federal government will reach its $14.29 trillion debt limit by May 16. If the ceiling is not raised, Washington will within a few weeks not have enough cash to pay all its bills. In a worst-case scenario, it could be forced to default on its debt.