GOP shutdown threat is the wrong way to win a budget war − history shows a better strategy for reducing the deficit
Retrieved on:
Wednesday, September 27, 2023
Medicaid, National, Senate, Federal, Tax, History, Public policy, Goal, Government, Medicare, Perch, Congress, US, Congressional Budget Office, Federal Reserve, Congressional Budget and Impoundment Control Act of 1974, Social Security, Democrat, Association, National Governors Association, Growth, Federation, Social, House, Freedom Caucus, Bank, Uranium mining, Renewable energy, Health insurance, Pharmaceutical industry
While fiscal discipline has long been the rallying cry for shutdown supporters, the tactic isn’t necessarily effective at reducing the government’s deficit.
Key Points:
- While fiscal discipline has long been the rallying cry for shutdown supporters, the tactic isn’t necessarily effective at reducing the government’s deficit.
- History shows that shutdowns are counterproductive – at least as measured by their own defenders’ goals.
- Fortunately, the past also provides a proven way to reduce the deficit, which I agree is a laudable goal.
Deficits are too high
- When House Republicans say America’s finances are in bad shape, they do have a point.
- The deficit, currently estimated at US$1.5 trillion, and debt held by the public, estimated at $25.8 trillion, are both dangerously high.
- For one thing, large deficits are inflationary and put pressure on the Federal Reserve to raise interest rates.
- That would make interest rates spike and could create a major economic collapse.
Fighting the wrong battle
- I would argue that now is the wrong time for Republicans to take a stand on reducing the deficit, for two reasons.
- The U.S. has had 21 shutdowns over the past five decades, three of which have been major.
- These have all caused real harm to the U.S. economy, but they haven’t led to the spending levels Republicans wanted.
- The bottom line is that they’re ignoring national defense and mandatory spending, which together represent 75% of total spending.
How to get results
- Over the past 40 years, there have been six serious budget negotiations that resulted in deficit reductions.
- One in 2011, negotiated by then-President Barack Obama and House Majority Leader John Boehner, was likely the most successful from a fiscal perspective.
- When it was finally enacted, it generated $1.95 trillion in deficit reduction over nine years.
- These examples show that budget negotiations without threatening a shutdown can be effective at enacting major deficit-reduction plans into law.