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Budget deal politically a step forward, yet underwhelming

Fri, Dec 27th, 2013
Posted in All Commentary

Congress has managed to disappoint once again. Sure, the deal is politically significant in that they managed to find bi-partisan common ground and finally pass a budget which will fund the government through March 2015. Passing a budget is a basic responsibility of Congress and hasn’t been accomplished in Washington since 2010.

It is disappointing that they were able to find so little common ground. That being said, it is better than the alternative which would have been continued governing from crisis to crisis and possibly even another government shut down. The budget deal, while providing some stability, does next to nothing to deal with the long term fiscal problems we face as Americans.

Rep. Paul Ryan (R) suggested they have to make the divided government that they have work, but he didn’t see any chance for a grand bargain. The message I heard was that it is not worth the effort to try. Ryan and Senator Patty Murray (D) worked together to come to a budget agreement the majority could live with. Senator Murray related that the deal showed compromise is not a dirty word.

The budget agreement sets spending slightly higher by restoring some defense and discretionary spending cut by the sequester. Some Republicans were not pleased with the spending increases and many were not convinced that the savings targeted to offset the spending would actually happen. The Democrats didn’t get the extension in unemployment benefits for the long term unemployed that they wanted. This falling short of what each side wants is the definition of compromise.

One upside to the budget deal is the time and energy Congress should have in the next few years to deal with a multitude of other issues standing in the way of progress. These issues have been put on the back burner while fighting again and again about the budget. Of course, politicians will have to find a little time between raising money and campaigning for reelection. Secondly, the economy may do better when not being affected by the fits and starts of Congress.

Maybe Congress should be paid on commission. I read a few days ago that research has shown that children will eat their fruits and vegetables when they get a monetary incentive for eating them. Maybe Congressional pay should be contingent on productivity. They seem to have an aversion to the hard work of give and take to get a deal both sides can live with. It takes courage and effort to compromise while spouting their moral superiority to their base takes little effort.

The greatest downside with the passage of this budget deal is the pass it gives Congress to continue to postpone the hard decisions. Now our politicians have little incentive to deal with the long term fiscal problems for another couple of years, after the midterm elections. During this delay our debt will continue to grow, more baby boomers will retire, and pressure on the solvency of Social Security and Medicare will increase. Until these long term structural problems are dealt with, the credit worthiness of the country is at risk.

The Simpson-Bowles commission released a framework to deal with the country’s long term fiscal problems three years ago. Few in Congress or the administration had the courage to support the plan which would certainly be unpopular with much of the public, but it would have been a giant step to reverse the fiscal slide we have been on. The plan had significant increases in revenue through tax reform and changes to entitlement programs to keep them viable for years to come without bankrupting the country. A 15 cent gas tax increase had been proposed to improve an aging infrastructure. Our infrastructure is deteriorating. We are falling behind other industrialized countries on education outcomes. It is important to invest in research and development to be competitive globally. One example, European weather forecasting is superior to the ours. Entitlements (Social Security, Medicare and Medicaid) if not addressed will soon swallow up the federal budget and leave nothing for discretionary spending.

As these programs expand, as they certainly will, the portion of the pie left for everything else shrinks. The cost of most everything is increasing; most likely interest rates will increase and put further pressure on the budget in coming years. Even with a restructuring of the entitlement programs, it is only reasonable that there also will need to be increases in revenue.

Investments have to be paid for. Our economy has been improving despite the foot dragging by Congress and that will help increase revenue. There are a trillion plus dollars of loopholes in our federal tax system including credits and deductions. Special interests lobby to protect every one of them. Some are surely wasteful spending.

The prescription of tax reform and reasonable changes to entitlements will be hard to swallow, so the disease is allowed to flourish. This budget deal is like treating lung cancer with cough medicine.

The public has to give Congress the license to make the hard choices. To put our fiscal future on a healthy path there will be some sacrifice required by most all Americans.

Nothing holds our system of government back more than the “purist” ideal. Purist political philosophies that are hard left or hard right and inflexible only gum up the works. In the end the only thing that will get the support of the public and will pass Congress is a bargain that blends political philosophies on both sides. Doing nothing or very little can not continue to be an option. Whether or not you think the size of the federal government is too big, the status quo is not viable. With this small deal members had to talk to the other side, which is in itself a positive step.

In another couple of months we’ll have to suffer through another political fight over raising the debt ceiling. And, on it goes. We can only hope Congress makes a New Year’s resolution to work together for the good of the country. Trust and confidence in the federal government has eroded in the last decade. The legacy of the 113th Congress will be that it was the least productive, most ineffective in history.

Minimum Wage

It is historically very low. If the federal minimum wage had been increased over the last 45 years at the same rate of increase as the cost of living, it would be at about $10.50 per hour. The federal minimum wage is now $7.25 per hour. The first enactment of the minimum wage was in the 1930s.

For several decades now the rich are getting richer and the poor are getting poorer and that divide is accelerating.

Today low paid workers are subsidized by the government through a variety of programs. If the minimum wage was raised upward toward $10 per hour, it would surely hurt some small businesses. Some economists believe it would boost the economy because low income workers tend to spend most all they earn. Others argue raising the minimum wage would mean a cut in hours for workers or a slow down in hiring.

Over the last several years during a weak job market, workers have been forced to accept a low wage.

Nineteen states have went ahead and set a higher minimum wage than the federal government. Minnesota may look at setting a minimum wage higher than the federal minimum this next session.


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2:24:44, Dec 30th 2013

Bonita Underbakke says:
Dear Karen,
Thank you for another excellent column. You explained our national budget issue clearly and fairly. "The budget deal is like treating lung cancer with cough medicine."