Boehner's Budget Battle Is Just Beginning
As predicted, the Fiscal Year 2011 budget fight seems very likely to morph into a general fiscal battle that includes the 2012 budget and a fight over increasing the present $14.3 trillion federal debt ceiling.
As they say in the country, this means the Congress is “wrapped around the axle.” There are four important constituencies carefully watching the budget fight. And so far, Congress hasn’t a clue about how to resolve any of their spending fights in a way that would satisfy all four groups.
Who are these important budget battle watchers?
First up are the new members of the House Republican caucus. They want more real cuts, and they want them quickly, so they can tell folks back home that things are different now in Washington after the November midterm elections.
Next, any budget deal will need to pay close attention to the members of the Democratic Senate and House caucuses. They want to keep “critical” spending programs safe from the “unwashed” Republican House majority;
Then there’s President Obama, who watches from Olympian heights now, but at some point will have to get down and dirty in order to keep the government open, programs alive, and his own reputation intact.
Finally, and, perhaps as important as any: the bond markets of the world, who expect very little real action from Washington, D.C., and will eventually demand higher and higher interest rates on American sovereign debt.
In that last regard, it was James Carville who once famously said, “If I am re-incarnated, I want to come back as a (expletive deleted) bond trader.”
Here’s the approximate timeline for all this fun:
April 4 is the scheduled beginning for the development of the Fiscal Year 2012 congressional budget resolution.
On April 8, we’ll have the expiration of the present Continuing Resolution that funds appropriations for FY11.
Later in Spring, the present debt ceiling expires and Congress will need to vote on increasing it.
What will happen? Here’s my bet on outcomes:
The budget resolution for FY12 is likely to take the form of just numbers, with promises that some process will eventually be found to someday help make those numbers fiscal reality. Ryan will get enough votes in committee to pass it out, but it will be a resolution that finds little support in the Senate.
As for the continuing resolution, expect a 1 or 2-day “shutdown” of the government over the April 8-10 weekend, and passage of a long-term CR for FY11 based upon Ryan’s budget resolution promises, and an agreement with the Senate on the CR.
In regards to the debt ceiling, expect passage of at least one short-term extension ($300-$500 billion increase to the ceiling) and perhaps more, as Congress begins to forge a process through which fiscal promises can be made real, with movement on the process starting in the Senate with the “Gang of Six.”
In short, a 30 per cent or so chance exists that circumstances could compel a true, comprehensive process to enact legislative changes to Medicare, Medicaid, pensions and other entitlements.
If, indeed, this is the fiscal anna mirabilis, then bond markets, currency markets and equity markets should be pleasantly surprised and odds are that the slow economic recovery could speed up.
Complicating all this and tightening the rope around the axle, are various policy fights—for example, funding for Planned Parenthood and Environmental Protection Agency restrictions—that may force some members, regardless of how rosy fiscal numbers look, to vote “no.”
Even in the best possible world, Ryan and Speaker Boehner will have to ask their members to vote for a deficit for the next couple of years that will likely exceed $1 trillion. That reality can be finessed, but it will take extraordinary work.
Oh, and did we mention before that John Boehner has the toughest job in Washington, D.C.? He has been able to avoid a collapse within his caucus so far, which in and of itself is remarkable. The job ahead, however, dwarfs the challenges he has already surmounted.
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