US Budget Battle and its Consequences

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The GOP had started out the battle with Paul Ryan's plan to cut $32 billion in discretionary spending from the 2011 budget. It escalated to a $74 billion cut proposed by the GOP leadership. The Tea Party crowd objected to the House leadership plan and demanded a $100 billion cut. The administration started out with a $20 billion cut and it looks as if it has moved to $50 billion compromise to prevent the GOP shutdown of government by failing to raise the national debt level.

If the next compromise is to split the difference between the Tea Party goal of $100 billion and the new administration target of $50 billion, the result would be close to the House leadership proposal of $75 billion. So it looks as if the GOP, by taking a harder stance on budget cuts, that are believable because of Tea Party demands, will win the negotiation battle at the expense of the American people. Unemployment will rise; economic growth will slow and vital government services will disappear. This will set the stage for the 2012 election cycle with the economy in very bad shape. This will be good for the GOP but bad for the country.

What is described above is just another political contest over budget negotiations. The outcome will not be good but the real shame is that it does little to deal with our long-term deficit problems. They are all about the rising share of healthcare costs in the projected budgets. The GOP has turned the battle of budget deficits to a way to appease its Tea Party supporters who have no understanding about the central issues. Unfortunately, the administration believes that has been forced into the wrong game and it has chosen to be weak player in the game.