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Why you should care about latest govt budget fight

Posted: September 26, 2013 - 12:15am

WASHINGTON — You’ve heard it all before.

The government is headed for a fiscal crisis caused by partisan gridlock. The stakes are high. U.S. credibility is on the line. The economic recovery could be derailed.

Is this a faux crisis that will quickly pass or the real deal?

Time to sort through the reality and the hype.

SOUND FAMILIAR?

Yes, there’s been similar hand-wringing before. Threats of a government shutdown and-or default have become increasingly common in recent years, particularly since the 2010 elections when voters elected to Congress a big tea party contingent made up of lawmakers intent on reining in the federal government and slashing spending.

The last time the government shut down — a double whammy late in 1995 and early in 1996 — politicians (especially Republicans) caught so much grief that they’ve generally avoided that tactic ever since. But the tea partyers didn’t live through that shellacking, and many of them aren’t afraid of bringing the entire government to a halt to extract concessions or at least get a little attention.

Even some tea party people are balking, though. Sen. Rand Paul, R-Ky., a favorite of that group, has called closing the government “a dumb idea.”

ANATOMY OF A SHUTDOWN

In truth, a government shutdown probably wouldn’t be that drastic. Think of it more as a government slowdown than an outright shutdown. It looks like the Obama administration will follow past rules regarding which federal employees work and which don’t. If that’s the case, less than half of federal workers would be forced off the job. (Sensitivity alert: There could be a lot of bruised egos among the 800,000 or so people whose jobs aren’t considered essential enough to keep them working during a shutdown.)

A lot of programs would keep running — air traffic control, food inspection and much more — but there would be plenty of annoying disruptions. Closed museums and parks. Unanswered phones. No trash collection in the District of Columbia. Possible delays in nonurgent (except, perhaps, to you) services such as passport applications. As well, based on what happened in the last shutdown, the nonpartisan Committee for a Responsible Federal Budget says to expect delays in processing applications for Social Security and Medicare benefits, but no disruption in checks to existing beneficiaries. It also expects disruptions in some delinquent child support and bankruptcy cases, applications for federally guaranteed mortgages and some law-enforcement hiring.

Oh, and one potentially annoying nondisruption: Members of Congress don’t get furloughed.

SAVING MONEY. NOT.

Government shutdowns tend to cost money, not save it, according to the committee. Already, there’s a lot of time being spent simply preparing for a shutdown, regardless of whether it comes to pass. The 1996 shutdown cost taxpayers $1.4 billion, according to estimates from the Office of Management and Budget. That’s a lot of money to make a point about the need to save money.

X DATE SCENARIOS

No hype, a government default could have ramifications that ripple through the whole economy. Even the threat of a default had big ramifications in the summer of 2011, when the stock market dropped, the U.S. credit rating was downgraded (making future borrowing potentially more expensive), consumer confidence slipped and businesses stopped hiring. But because default is unprecedented, no one’s sure exactly what would happen.

While the Treasury Department probably would continue to make interest payments to bondholders, it wouldn’t be able to make other payments on time, which could mean delays in Social Security benefits and in paychecks for federal workers and U.S. troops.

How exactly would a default work? The government could decide to pay some bills and sit on others, or it could wait until it has enough tax dollars to make an entire day’s worth of payments — all of them late.

The first strategy would be hard to implement because the government might not have the legal authority to do it or the computer reprogramming ability to quickly pull it off. Under the latter scenario, nobody would get paid on time but everybody would wait in the same line, which would create its own problems.

Treasury Secretary Jack Lew thinks the government will exhaust its borrowing authority no later than Oct. 17, with $30 billion left in cash on hand, and before long wouldn’t be able to pay all its bills. The Bipartisan Policy Center, a Washington think tank, calculates that if X Date arrived on Oct. 18 and Treasury then decided to gradually make all payments, Social Security payments due on Nov. 1 wouldn’t go out until Nov. 13.

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STILL MORE TROUBLE

Remember when everyone was worried about threatened budget cuts called the sequester? Sequestration seems so yesterday — last March, to be exact. But it’s still around, driving defenders of military and social services budgets crazy, and not disappearing any time soon.

This budget animal reduces spending across the government, with the goal of saving $1.2 trillion over a decade, and stays in place until politicians agree on something big to replace it with. Do not hold your breath.

If lawmakers find a short-term budget fix to prevent a partial government shutdown or to end one, that alone won’t do away with sequestration. It’s going to take a megadeal to accomplish that. Right now, even a microdeal on budget matters is hard enough to get.

In early 2013, Obama administration officials came forward to warn that the public (known by all politicians as The American People) would feel great pain if these automatic budget cuts went into effect. Terrible lines at airports, food inspection hiccups, “a perfect storm” at national parks and much more.

But while many federal workers have had to take unpaid furlough days, most Americans have barely felt a pinch. So the administration doesn’t have a ton of cred when predicting fiscal doom and gloom. Yet there’s fairly widespread agreement that the longer these cuts go on, the more they will hurt.

It’s like fasting, says Paul Light, a New York University professor who specializes in the federal bureaucracy and budget. “The first couple of hours, not so bad. But just thinking back to Yom Kippur, by 3 o’clock you’re saying ‘Holy moly.’ So I’m not yet willing to say, the sequester — it wasn’t that bad and therefore the shutdown wouldn’t be that bad.”

Whether there is another round of across-the-board reductions in January depends on the level of spending that Congress sets for this fiscal year. If lawmakers exceed sequestration spending caps when they finally pass a spending bill, another round of cuts will be required.

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HEALTH CARE WARS

The president’s health care law has nothing — and everything — to do with the budget battle. Conservative Republicans latched on to this fall’s fiscal deadlines as the perfect leverage to reach a goal that’s eluded them for three years, driving a stake through what they derisively call “Obamacare.” So House Republicans approved a budget bill tied to a provision that would simultaneously defund it.

All sides know that strategy is doomed in the Democratic-controlled Senate, setting up the potential impasse that could lead to a government shutdown and/or standoff on the debt ceiling. Light says it’s “beyond belief” that legislators would allow the government to default, with dire consequences for both the economy and their own political futures. “If the tea party forces a default and the economy collapses,” he says, “that’s a party that’s going to be dead.”

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COMIC RELIEF

The budget battle sounds kind of like a movie called “Grim and Grimmer.” But even downer movies usually have some comic relief.

Sure enough, comics are finding some laughs in the government’s budget travails and the fight over Obama’s health care law:

—”President Obama warned that the government could shut down in two weeks. Obama added, ‘Not because of a budget impasse but because we’ll all be watching the last episode of “Breaking Bad.’’’” — Conan O’Brien.

—”Obamacare is coming, folks. Run for your lives. No, wait. Don’t run for your lives. That will make you healthier. And that is just what he wants.” — Stephen Colbert.

— “If Republicans and Democrats can’t get together, there’s a strong possibility of a federal government shutdown. You know what the legal definition of that is? A government shutdown is when Congress continues not to work, but they do it from home.” Jay Leno.

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THE PEOPLE SPEAK

If legislators decided to drop all the bluster and do what most people want, they could be in a pickle.

People don’t know what they want. They are no help at all.

To wit:

—Almost three-quarters in a Washington Post/ABC News poll this month predicted serious harm to the economy if the government can’t borrow more money to pay for its operations. Yet they were split on whether it’s better for Congress to raise the debt limit (46 percent) to enable more borrowing or to default on paying its bills (43 percent).

So a significant share essentially said: terrible idea, go for it.

—In an NBC/Wall Street Journal poll this month, only 22 percent said Congress should raise the debt ceiling, 44 percent said it shouldn’t and fully 33 percent said they didn’t know enough to have an opinion, despite being given a description of how the debt ceiling works.

—In a Pew Research poll this week, most respondents (57 percent) said the lawmakers they agree with on budget issues should be willing to compromise to get an agreement. Only one-third wanted them to stick to their principles to the point of closing parts of the government. Fine, but compromise how?

The public is no guide when it comes to the nitty-gritty of cutting spending, public opinion research has found for years. People love the idea but don’t love higher taxes, and they want their roads, schools, Social Security checks, Medicare, armed forces, food inspectors, safe flights, cleaner water and so on.

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BLAME GAME

Who gets the blame for a government shutdown could well depend on whether the conventional wisdom is right.

Democrats believe, and many Republicans fear, that the GOP will take the hit, because they did last time, in 1995-1996.

There’s little question Republicans lost the last showdown. After all, they ended up settling for a deal very close to the one President Bill Clinton was offering before parts of the government closed for a week in late 1995 and three weeks in early 1996. Less clear is the political toll that exacted on the GOP. Clinton, whose presidency had once seemed on the ropes, won a second term months later. Even so, Republicans held on to their House and Senate majorities in that election.

A leading poll during that showdown found 47 percent blamed Republican leaders in Congress for the shutdown, 25 percent blamed Clinton and 21 percent said both sides were equally to blame. Advantage Clinton.

But another poll, taken when the dust settled, found little change in the public’s perceptions of Congress or Clinton. The president came out of it with the same approval rating as before the crisis, 47 percent, and Republican House Speaker Newt Gingrich emerged with the same disapproval rating as before, 57 percent.

There’s no guarantee, of course, that public opinion history will repeat itself.

In the Pew poll this week, close to as many are blaming Obama (36 percent) for the potential shutdown as are blaming the Republicans (39 percent), and 17 percent found equal fault with both sides.

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CRYSTAL BALL

The health care law will survive. Beyond that, there’s a lot of uncertainty. Many people think legislators motivated by self-preservation will pull off some kind of last-minute compromise to avoid both the government shutdown and the default. But then again, a lot of people never thought the sequester would take effect, either.

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Associated Press writers Stacy A. Anderson and Jennifer Agiesta contributed to this report.

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Follow Nancy Benac on Twitter at http://www.twitter.com/nbenac

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