No Shutdown, But The Real Budget Debate Has Only Just Begun

Bloomberg reports Obama Says Goverment Will Be Open for Business After Deal

President Barack Obama said he and congressional leaders reached a compromise agreement to fund the government and prevent the first shutdown in 15 years.

Less than an hour before government funds were to run out, Obama announced at the White House that the federal government would remain open.

“Both sides had to make tough decisions,” the president said.

The accord would slash $39 billion from federal spending this year while jettisoning Republican provisos that would have defunded Planned Parenthood and blocked environmental rules.

Ho Hum – Are We Supposed to be Happy?

My long-held belief is that we would have been better off had there been no deal at all. Government would have shut down and it would not have mattered.

I am not the only one with that view.

Yesterday, in How I Learned to Love a U.S. Government Shutdown Caroline Baum asked …

What if the U.S. government shut down and no one noticed?

Even worse (or better, depending on one’s point of view), what if all federal workers went on furlough and the public realised there were benefits, not just costs, to smaller government?

Unfortunately, we do not get to find out.

Everyone knew there would be a deal before it mattered even if there was no deal tonight.

Real Battle Can Now Begin

The real battle will soon start. Paul Ryan wants to cut $6 trillion over the next 10 years. If it took several months to agree to a mere $39 billion, (less than 1 % of the budget), how long will it take to get agreement on $6 trillion?

What About defence Spending?

Can we really be serious about tackling the deficit while doing nothing about defence spending? I think not.

The United States spends more on defence than the rest of the world combined. We have troops in 140 countries. Yet, the simple fact of the matter is the US can no longer afford to be the world’s policeman.

If other countries want our troops, perhaps they should pay us. However, it would be better yet if we would simply leave on our own accord.

As long as we are packing our bags, we should pack up and leave Iraq and Afghanistan. It’s time to declare the wars are won and leave.

If we do that, and pull some troops home, it should be an easy matter to cut $200 billion a year out of the defence budget. That would save $2 trillion over 10 years. Actually I think we should cut far more, but I am hoping to come up with a number that has a chance.

Sharing the Sacrifice

  • Where is the proposal to share the pain?
  • How about lowering wages and benefits of those in Congress?
  • How about reducing Congressional staff budgets?
  • How about making Congress immediately accept the same health-care plan it passed for the rest of the country?

The best think we can say about Ryan’s proposal is that it is a step in the right direction. However, it would have been better to take a far bigger step, because you never get everything you ask for.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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