The 1974 Budget and Impoundment Act requires Congress to pass a budget resolution by May 15 of each year. Congress hasn’t done so yet in 2010. But that isn’t so unusual. Delays are common.
They are usually the result of interparty or intercameral disputes. But this year is different. Congressional Democrats aren’t simply delaying, they’re deliberately refusing to offer a budget until after the November elections. They’re simply choosing to ignore the law.
The politics are not complicated. Democratic leaders do not want to send members home to face their constituents after voting for a budget that would take the deficit to record levels. But the spending trajectory established by Barack Obama—and rapidly growing entitlements—leaves them little choice. The administration’s own proposal, offered in February, runs a deficit of 7-10 percent of the U.S. gross domestic product for the next nine-year budget window. That’s unsustainable and irresponsible. So rather than vote for such a grotesquely distended budget, Democrats reason, better to simply skip the vote and shrug off whatever criticism comes.
This isn’t speculation. Representative Gerry Connolly, a Democrat from Northern Virginia with a competitive race this fall, confirmed the strategy in an interview with the Los Angeles Times. “I’m not going to vote for anything with that magnitude [of deficit],” he said. He’s betting his constituents won’t care. “Name one person who won or lost an election because they didn’t get a budget resolution passed. It’s totally inside baseball.”
If the politics are simple, the implications are real.
In the short term, failing to pass a budget resolution almost guarantees even more irresponsible spending. A budget resolution sets spending targets for congressional committees and makes it procedurally more difficult for members of Congress (in either house) to increase spending. (In the Senate, for instance, adding new spending requires 60 votes after a budget resolution and only 51 before.)
Keith Hennessey, who served as senior White House economic adviser under George W. Bush, describes the short-term effects this way:
Without an annual budget resolution, . . . discipline does not exist. Committee chairmen spend and tax as they see fit, because there is no overarching structure to rein them in. It can become budgetary chaos.
And budgetary chaos means more spending.
It’s win-win for congressional Democrats: Moderates get to avoid a tough vote and liberals get to spend more. “The Democrats get what they want and the taxpayers get the shaft,” says Representative Jim Jordan, a Republican from Ohio who’s a leading critic of the Democratic strategy.
That’s bad. But the long-term problems are worse. If Congress does not pass a budget resolution before the election, Democrats will push one through during the lame-duck session before a new Congress is sworn in. Democrats will be able to ratchet up discretionary spending, and these increased levels of spending will be the fallback levels in the event that future spending disputes require Congress to revert to continuing budget resolutions.
If ensuring budgetary chaos and locking in higher levels of discretionary spending isn’t depressing enough, there’s always the prospect of a genuine debt crisis.
Virtually everyone agrees that the current level of federal spending is unsustainable. In congressional testimony earlier this month, Federal Reserve chairman Ben Bernanke acknowledged that something has to change.
“We need to convince markets in the medium and longer term that we have a sustainable fiscal path for balancing our budget or at least bringing our deficits down,” Bernanke said. Although he does not favor immediate deep spending cuts, Bernanke acknowledged the “need” for a plan.
Yet the Obama administration has shown no interest in cutting spending. Indeed, President Obama wrote to European leaders ahead of the upcoming G-20 summit in Toronto and warned that their austerity measures—including spending cuts—could slow our recovery. In that same letter, Obama raised the possibility of still greater U.S. government spending. “In fact, should confidence in the strength of our recoveries diminish,” he wrote, “we should be prepared to respond again as quickly and as forcefully as needed to avoid a slowdown in economic activity.”
If the Obama administration won’t cut spending and the current deficits are unmanageable, we’re left with just one option: Raise taxes.
Paul Ryan, the ranking Republican on the House Budget Committee, thinks that the administration is taking the country to the brink in order to create a political environment where significant tax hikes are salable: “I don’t think they’re totally uncomfortable with a debt crisis because in a crisis they can do a VAT (value-added tax).”
When Republicans cut taxes in 2003, Democrats accused them of trying to limit the size of government by depriving it of the revenues it needs to grow. Ryan says this was half right. The tax cuts were primarily meant to generate immediate economic growth, but Republicans indeed hoped that down the road they would “starve the beast.”
Democrats, says Ryan, now want to “stuff the beast.” “When debt and deficits get so out of control, they’ll need to come up with a way to address the problem.”
The Democratic strategy: Create a crisis so that they have to create a solution.
Stephen F. Hayes is a senior writer at The Weekly Standard.