Wednesday, April 7, 2010

The Daily Strike-4/7/10-Budget Preview

Good evening and welcome to the Daily Strike. Again, it is a very slow news day. I'm just itching for Congress to get back in session. So naturally, I'll be talking about what Congress will be doing when they get back in session. If you want to read about death threats to members of Congress who supported health care, or an idiotic Virginia governor who wrote a proclamation celebrating Confederate history without mentioning slavery, you'll have to look elsewhere.

BUDGET BATTLE: When Congress reconvenes next week, they'll most likely begin consideration of the FY 2011 Budget Resolution. The resolution, as we explained last year, sets non-binding targets for discretionary spending, and also projects the overall budget picture for the next five years. The budget resolution represents the totality of goals for the party in power, basically, so it's only natural that it becomes a bitter partisan fight. President Obama's proposed budget, which will likely be similar to the one proposed by Democrats in Congress, projects trillion dollar deficits for the foreseeable future. It's basically handing the Republicans an opportunity to hammer home their "Democrats are big spenders!" talking points.

The reality, of course, is that at least a third of the deficit is due to the continuing effects of the recession. During a recession, spending increases on safety-net programs (like food stamps and unemployment), and tax revenues decline sharply. The rest of the deficit is largely the result of the Bush tax cuts, wars that weren't paid for, and a $500 billion Republican prescription drug program. All of the spending in the last year, including the bailouts and the stimulus package, account for a very small portion of the deficit.

Democrats have never been good about explaining the causes of the deficit. People seem to think the deficit is caused by amorphous "government spending," and the media reinforces these perceptions. If the Democrats are smart, they will use this budget battle as an opportunity to hammer home the root causes, and needed solutions, to the deficit problem. Democrats should hammer home that the way to decrease deficits in the long-run is to create jobs. A government that spending money temporarily to put people back to work, will save money in the long-run. This is counter-intuitive to voters, but it is worth the time and effort to explain. It would be nice if every speech a Democrat gives on the budget talks about how we need to invest now to save later.

I'm gonna go out on a limb and say that won't happen. For one, President Obama has lent credence to deficit myths by proposing to freeze discretionary spending (which will have a minuscule effect on the deficit). Also, the Blue Dog Democrats, who have the power to shape the Budget Resolution, will want to show off their deficit-cutting credentials ahead of this fall's elections. These factors will make it easier for Republicans to pound home their message and exploit Democratic divisions.

Of course, Democrats could save themselves a political fight and not pass a Budget Resolution at all. Republicans didn't pass one in their last year in power, 2006. The problem is that they wouldn't be able to use the reconciliation process later in the year if they don't pass a budget resolution with "reconciliation instructions." Since Republicans will filibuster anything and everything before the November elections, Democrats would be wise to pass some key bills under reconciliation. For example, they could use the reconciliation process to enact a jobs measure that funnels money to state and local governments.

To sum up, it will be an interesting legislative fight that will be coming up over the next couple of months. Stay tuned.

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