A US Budget deal

December 12th, 2013 at 7:42 am by David Farrar

Reuters reports:

A bipartisan budget deal announced in the US Congress, while modest in its spending cuts, would end nearly three years of partisan stand-offs between Democrats and Republicans that culminated in October with a partial government shutdown.

Democratic Senator Patty Murray and Republican Representative Paul Ryan appeared before reporters Tuesday (local time) to announce the US$85 billion (NZ$102 billion) budget accord, which still must be approved by the full Senate and House of Representatives.

“For far too long compromise has been considered a dirty word,” Murray said, adding that the uncertainties created by three solid years of Washington bickering “was devastating to our economic recovery.”

Ryan, the Republican Party’s 2012 failed vice presidential candidate who has his eye on either a 2016 presidential campaign or potentially a House leadership job, wasted no time in trying to blunt criticisms of the pact, especially from fellow conservatives.

“In divided government, you don’t always get what you want,” Ryan declared.

But he added, “I think this agreement is a clear improvement on the status quo. This agreement makes sure that we don’t have a government shutdown scenario in January. It makes sure we don’t have another government shutdown scenario in October. It makes sure that we don’t lurch from crisis to crisis.”

It would blunt the effect of automatic “sequester” spending cuts by allowing federal agencies and discretionary programs to spend US$63 billion (NZ$75 billion) more over two years, while savings are made elsewhere. It also would provide an additional US$20 billion to US$23 billion (NZ$24 billion to $27 billion)  in deficit reduction over 10 years.

This is a pretty good outcome. Obama and the Democrats didn’t get any tax increases, and the level of spending is slightly less than it would have been under the automatic sequester. Also the Democrats didn’t get an extension in what was meant to be temporary unemployment insurance.

Not a great deal for either side, but a workable one.

 

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21 Responses to “A US Budget deal”

  1. Camryn (552 comments) says:

    A good first step towards addressing disfunction. Next, America urgently needs to eliminate gerrymandering so that it elects politicians who can communicate with (and persuade) the population rather than preach to a choir.

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  2. redqueen (552 comments) says:

    Was certainly a shock seeing that headline. I thought they’d resigned themselves to being numpties every 6 – 9 months…but we shall have to see how the Senate and House actually vote.

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  3. WineOh (624 comments) says:

    Looks like both the dems & republicans have finally got the message from the public and the markets that they need to work on compromise solutions rather than using ideological positions to hold the economy hostage. Good result.

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  4. Nigel Kearney (965 comments) says:

    I guess the Republicans have decided there are more votes for them in allowing Obamacare to be rolled out than in trying to prevent it.

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  5. Ed Snack (1,833 comments) says:

    Pity that the deal increases spending over what the sequester was forcing, the US Government is still spending way too much and has no apparent intent to rein in the deficit. All they are doing is monetizing it through the Fed’s “quantitative easing”, aka printing money.

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  6. stephieboy (2,638 comments) says:

    Nigel Kearney (596 comments) says:
    December 12th, 2013 at 8:29 am

    A great pity actually that a compromise was sought and found. I was banking on the US defaulting with greater unemployment with the Federal Government closing down. That would of had flow on effects for the state governments who depend on the central govt for a number of subsides and supports
    This would of led to an angry electorate letting the Republican far right rock apes and tea baggers get a pasting in the mid term elections. Deservedly so .!

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  7. Simon (727 comments) says:

    “I was banking on the US defaulting”

    Which makes you a moron. The US govt couldn’t default on the interest payments which for now makes only a small part (comparative) of the US budget.

    The default talk was for the sheeple like you.

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  8. Scott (1,761 comments) says:

    It is good that the 2 sides have made a deal and are starting to operate according to regular order rather than in crisis all the time. Much of the blame in my opinion for the division lies at the feet of Obama who has never run anything and doesn’t really know how to compromise with those on the other side of the aisle. In fact he never actually seems to go to work? He appears to spend all his time at campaign rallies making partisan speeches to carefully hand-picked audiences. Why he thinks the Republicans will ever compromise with him when he spends all of his time telling his hand-picked audiences how bad the Republicans are, is a complete mystery?

    The big question of course is the huge amount of debt that the United States has – something like $17 trillion. Unless the debt is dealt with the long-term future of the United States of America seems bleak. Sooner or later you have to pay the piper. This current President and his Democrat cohorts have no desire to pay off the debt. The only concern of the Democrats is to make sure they pay government money to those groups they see as disadvantaged.

    The tea party in my opinion far from being a radical group, is the only group of people that faces reality. The country cannot go on with a $17 trillion debt. It is an ocean of money and if not dealt with will bring the United States of America into bankruptcy. That will be terrible news for the other nations of the world including this one. So I think we should support the tea party because they are the ones want to do something about the fundamental structural problem of the United States economy, which is its crippling and overwhelming level of debt.

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  9. berend (1,699 comments) says:

    DPF: This is a pretty good outcome.

    It’s a bad deal.

    I suppose with John Key now on the “maternity leave” bribe, it’s now time to come out that we always have loved tax increases.

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  10. Fletch (6,234 comments) says:

    I don’t know what the Dems (and indeed, all liberals) have against cutting spending.
    Everyone in real life has to do it. You look at how much money you have, how much you’re spending, how much you’re borrowing, and you quit spending if it looks unsustainable.

    But no, they refuse to cut spending, even on useless programmes or handouts. Labour in NZ would have continued spending us into more debt if they’d still been the Govt.

    I don’t know why they have this idea that they can keep on doing it with no repercussions.

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  11. Nigel Kearney (965 comments) says:

    I don’t know what the Dems (and indeed, all liberals) have against cutting spending.
    Everyone in real life has to do it. You look at how much money you have, how much you’re spending, how much you’re borrowing, and you quit spending if it looks unsustainable.

    Voters prefer overspending to a balanced budget and neither side is responsible and principled enough to refuse to do it. Democrats are slightly worse but not much. The more interesting question is why voters want overspending and how to explain to them that a balanced budget will actually lead to greater prosperity.

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  12. PaulL (6,015 comments) says:

    @Nigel, I don’t believe that voters prefer overspending. What I think they prefer is that their particular favourite programs aren’t cut, they want other people’s programs cut. But, getting to a balanced budget won’t sway their vote, and cuts to their favourite program will. If you have to cut 200 programs to get to a balanced budget, and in aggregate each of those programs has 0.2% of voters who support it, then you just lost 40% of the electorate. There’s always another 20% who won’t vote for you on principle, at which point you’re screwed.

    To some extent the reality is that democracy causes this. Not saying that I think democracy is a bad thing, just that like all political systems it has some drawbacks. Luckily democracy has fewer drawbacks of the killing your citizens and/or subjugating them like serfs kind, so on that basis we should still prefer it.

    So far as I can tell the cycle involves a slow build up of crony capitalism in the system (in recent years fostered more by the left than the right, but not always so), and a slow build up of welfarism and special interest groups (also in recent years pushed more by the left). At some point we get the Roger Douglas moment where the mess is obvious enough that everyone is better off even if their favourite programs get cut – so long as everyone else’s is cut at the same time. Then we get 20-30 years of everyone talking about how horrible that was whilst they vote to return to that exact situation.

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  13. Weihana (4,496 comments) says:

    Fletch (5,230 comments) says:
    December 12th, 2013 at 10:37 am

    I don’t know what the Dems (and indeed, all liberals) have against cutting spending.
    Everyone in real life has to do it. You look at how much money you have, how much you’re spending, how much you’re borrowing, and you quit spending if it looks unsustainable.

    The reason is that your analogy does not work for a national economy. The family budget is not the same as a government budget. In an economy our earnings are someone else’s spending thus cutting spending has the potential to reduce earnings if it lowers aggregate demand. Similarly raising taxes may reduce spending and thus lower demand. The answer is never going to be as simple as “cut spending” or “raise spending” or “cut taxes” or “raise taxes”.

    In the short term slashing spending will have an adverse impact on economic demand and that will not help. But of course you have to balance that against the long term need to live within our means. Ultimately there needs to be careful consideration of what is truly necessary in order to make sensible well targetted cuts. Some pain will be inevitable though and the question is who is to shoulder the burden? Inevitably it seems to be the most vulnerable who are deemed to be in ever need of more motivation because poverty is always too comfortable.

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  14. Weihana (4,496 comments) says:

    Fletch (5,230 comments) says:
    December 12th, 2013 at 10:37 am

    Labour in NZ would have continued spending us into more debt if they’d still been the Govt.

    Actually they lowered public debt while in office. Of course if they had won in 2008 it would have been inevitable that debt went up just as it has under National.

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  15. PaulL (6,015 comments) says:

    @Weihana: the “austerity” in the UK, which seemed largely to consist in restraining the rate of growth in spending, seems to have worked out OK.

    I think if the govt is overspending, and the govt overspending is largely directed at poor people (as it should be), then logically if you reduce govt spending it will disproportionately impact poor people. There’s no news there.

    Of course, in the US, there is also substantial corporate welfare. Massive corporate farms receiving subsidies to produce things that aren’t useful (think methanol as one example), bailouts for the auto industry etc. But in the main the money is flowing to spending on programs of dubious value, most of which are targeted towards poor people (although many of which end up in the pockets of the middle class). You can’t cut that middle class welfare without impacting on the poor. Muttering about how the rich are only paying 92% of taxes or whatever the number is today isn’t really helpful.

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  16. Weihana (4,496 comments) says:

    Scott (1,535 comments) says:
    December 12th, 2013 at 10:02 am

    Much of the blame in my opinion for the division lies at the feet of Obama who has never run anything and doesn’t really know how to compromise with those on the other side of the aisle. In fact he never actually seems to go to work? He appears to spend all his time at campaign rallies making partisan speeches to carefully hand-picked audiences.

    lol. Of course because anything he concedes (e.g. extending Bush tax cuts) isn’t a concession at all, it’s just the right thing to do. And every concession the Republicans make is an extraordinary gesture of their goodwill and their earnest attempts to meet in the middle.

    And of course any speech a Republican president gives is just the objective truth to other objectively minded reasonable people. Anyone who goes to an Obama speech is obviously an idiot because Obama says stupid stuff that I don’t agree with.

    Ahhh to be objective and completely unbiased. :)

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  17. cha (3,920 comments) says:

    Here’s a clue.

    https://www.govtrack.us/congress/bills/subjects/womens_health/6189

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  18. BlairM (2,314 comments) says:

    Next, America urgently needs to eliminate gerrymandering so that it elects politicians who can communicate with (and persuade) the population rather than preach to a choir.

    Agreed. But much of the gerrymandering is the fault of minority-majority districts. Even if the Republicans wanted to shoot themselves in the foot by having fairer boundaries, they are prevented by law from breaking up these districts, and even though they don’t help Democrats overall to have them, no Democrat would be suicidal enough to agree to the idea.

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  19. stephieboy (2,638 comments) says:

    Simon (521 comments) says:
    December 12th, 2013 at 9:31 am

    Sheeple.?? And to Sheeple like the IMF.???

    http://www.bbc.co.uk/news/business-24443806

    Here as well,

    http://www.bbc.co.uk/news/business-24453400

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  20. edd (157 comments) says:

    The yanks are stuck right now… They are in denial about that role of government in economic growth, and seem to be hoping that the free market will deliver sustainable jobs and raise living standards.

    But the fact of life is that a modern, nationalized economy needs government intervention/stimulation of some sort… If you don’t believe me look at China. They are living under massive government intervention/stimulation and they are also living with massive annual GDP growth.

    The American government, on the other hand, are stuck trying to stop stimulation (through money printing) but don’t have any plan to stimulate through investment/development. They want to leave that up to the private sector.

    And as we all know the private sector, if left alone, doesn’t deliver growth for the whole economy. They all get stuck chasing a smaller and smaller market share, in the quest to beat all others out of a dying market. Then a left wing government steps in, raises taxes, invests back into the country as a whole (something the private sector is fundamentally incapable of doing). Then, hay presto, the market starts growing again (and the private sector along with it)…

    But the yanks don’t seem to understand this right now. So they are stuck printing money till oblivion.

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  21. PaulL (6,015 comments) says:

    @edd. I think you’ll find that the Chinese have growth despite their govt, not because of it. They’re playing catch up with a reasonably well educated and ambitious population, and the one child policy gave them an enormous demographic dividend.

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