Shutdown averted

Republicans and Democrats made a deal at the last minute that will keep the government running:

Republicans and Democrats on Capitol Hill have reached an agreement that would avert a federal government shutdown, yielding more spending cuts for Republicans while giving Democrats a key win on an issue related to abortion rights, Senate Majority Leader Harry Reid’s office announced Friday night.

The deal to fund the federal government for the next five months will include $39 billion in spending cuts and will drop language related to Planned Parenthood. Lawmakers still need to approve a short-term stopgap funding bill before midnight, when the federal government will run out of money and cease operations.

The stopgap bill will allow lawmakers time to craft the longer-term, complicated budget for the rest of 2011.

via Congressional leaders review draft budget agreement that would avert shutdown – The Washington Post.

A perspective on the shutdown

Former Bush official Peter Wehner offers reasons why Republicans should not let the government shut down:

On the matter of a possible government shutdown, this needs to be said: The impasse is the product of a striking failure of governance by President Obama and his party.

Republicans are winning the fiscal debate. A government shutdown could cause a backlash.The reason we’re debating the 2011 budget several months into the fiscal year is because for the first time in almost four decades, Congress failed last year to propose a budget. Despite Democratic control of both houses and the executive branch, Congress failed to meet one of its most basic obligations. That said, those Republicans who are eager for a showdown and a shutdown of the federal government are making a serious strategic mistake.

First, the cuts and concessions Republicans have already secured will return domestic discretionary spending to pre-Obama levels. This is a fairly remarkable achievement, and conservatives would be silly to ignore it.

Second, President Obama, in matching spending cuts that Republicans asked for earlier this year, has positioned himself fairly well in terms of blaming the Republicans for a shutdown, if it happens.

Third, the difference between the two sides is less than $10 billion in a $3.5 trillion budget. This isn’t a difference over which it is worth shutting down the federal government.

Fourth, Paul Ryan, chairman of the House Budget Committee, submitted a budget for fiscal year 2012 earlier this week that saves more than $4 trillion over the next decade. It’s a political and intellectual document of enormous significance, easily the most comprehensive and impressive governing blueprint in generations. The Ryan plan is where Republicans should focus their energy and attention.

via Not Worth the Showdown – Room for Debate – NYTimes.com.

Shall we shut down the government? Again?

As of this moment, Republicans and Democrats in Congress are at an impasse over the 2011 budget.   Budget hawks in the Republican party have insisted on cutting President Obama’s spending plan.  Democrats have agreed to some $30 billion in cuts, but that is not enough for a key segment of Republicans.  If a budget doesn’t pass, the government shuts down on Friday.  (Well, “essential services” won’t, but still. . . .)

You may recall another time when Republicans scored a big Congressional victory over an unpopular Democratic president.  They demanded that the budget be cut and stood firm and uncompromising on that principle.  The government shut down.  Whereupon the public reacted against the Republicans, President Clinton’s popularity shot up, and he won re-election.

Is this a repeat of history?  Are the Republicans over-reaching, again? Will this mean the re-election of Barack Obama?  Is there anything different this time?

And here is a deeper question:  Will the American public tolerate a tough, trimmed down budget?  With so many Americans beholden in some way on federal money–getting social security, medicare, farm subsidies, business subsidies, government contracts, job-creating pork, federal programs, college loans, etc., etc.–even though they express worry about the deficit in the abstract, will they turn against any Republican or conservative who threatens to defund popular programs?

 

Government shutdown: Potential furloughs for 800k federal workers, disruption of D.C. services – The Washington Post.

Problems with the food supply

Just in case you need something else to worry about, global food prices are skyrocketing (here not so much–yet), due to increased demand and shorter supplies:

Since last summer, several events — floods in Australia, blistering drought in Russia, the threat of a poor winter wheat crop in China — have compounded concerns about the food supply and pushed world prices to the highest levels measured since the U.N. Food and Agricultural Organization began calculating its index in 1990.

For decades, the world was often swimming in surplus food because farmers were so productive. But rising demand has caught up, and reserves have become so tight that global food markets are vulnerable to even minor shocks. Many analysts say that higher, more volatile prices may be here to stay.

The new dynamic reflects in part the rising demand for meat in developing countries such as China, which has almost single-handedly driven up prices for the soybeans it imports for animal meal, as well as the increasing use of corn for ethanol. Today, at least a third of the U.S. crop goes for making fuel. In addition, there is spreading concern that climate change may make weather less settled and more disruptive to growers.

“For the last 60 years, the simple story was agricultural productivity — great productivity gains, unabated,” said Joseph Glauber, chief economist at the U.S. Department of Agriculture. “But in the last five years, prices have lifted, and you see this real strong demand.”

Since last summer, the market price for corn to be delivered in May nearly doubled from $3.67 to $7.23 as of late last month, according to data compiled by Dan O’Brien, an agricultural economist at Kansas State University.

Grain reserves have dwindled. The latest USDA estimates, released Thursday, show U.S. reserves of corn and soybeans at historic lows, less than 5 percent of projected demand for the coming year. Typical reserves have been three or more times that amount, a chief reason why it does not take much to send prices skyrocketing.

via Higher food prices may be here to stay – The Washington Post.

Disaster and national debt

Japan’s and ours. . .

As Japan begins the complex and costly job of rebuilding the areas of the country that were destroyed, the task will be made more difficult by the government’s vast debt.

Japan has the highest level of debt relative to the size of its economy of any major industrial nation — 234 percent of gross domestic product this year, the International Monetary Fund estimates, compared with 99 percent for the United States. With the cost of rebuilding devastated areas expected to be in the hundreds of billions of dollars, that debt level is likely to grow in the years ahead.

There are lessons for the United States. Even when borrowing rates are low, as they are for the United States and Japan, running high budget deficits can leave a country with less flexibility to respond to a disaster or an economic setback.

“When you have as much debt as the Japanese have, you’re vulnerable to this kind of shock and can’t do much about it,” said Carmen Reinhart, a senior fellow at the Peterson Institute for International Economics whose research shows that financial crises frequently lead to high debt burdens, which in turn cause other problems.

Borrowing money to rebuild after a disaster is a productive use of debt, most economists say. It is likely to have a high economic payoff and is a one-time expense. But because of its already high debt levels, the Japanese government may be forced instead to raise taxes or cut other spending to pay for the reconstruction, further damaging Japan’s weak economy.

A third option for funding reconstruction would be for the Japanese government to sell off some of its foreign assets, such as U.S. Treasury bonds. In theory, Japan maintains those reserves so it is prepared for an economic emergency, which surely this is.

via Nikkei recovers 5.7%; U.S. stock futures fluctuate over nuclear crisis – The Washington Post.

Michigan considering suspension of democracy

Thanks to Kirk Anderson for putting me on to what is happening in Michigan, which is considering passing a bill that would allow the Governor’s office to replace elected local officials.

Kirk explains:  “There’s a bill working its way through the Michigan legislature that would give the governor authority to place “emergency managers” in financially troubled localities to help get their governments back on the fiscal track.  The thing is, these managers have the power to remove elected officials like country administrators and school board members, fire employees, cut benefits, slash services, merge districts, etc etc.  I think it might be an interesting discussion since it pits financial responsibility vs. local governance, both conservative principles.”  From the linked article:

A day after facing hundreds of rowdy, pro-union protesters that filled the state Capitol, the Senate voted on Wednesday to grant broad new powers to emergency managers who oversee financially struggling cities and schools, including the authority to void union contracts and remove elected officials.

The controversial bills are expected to head to Gov. Rick Snyder’s desk for signature shortly, after the House and Senate, both controlled by Republicans, work out some language differences.

The Senate passed the main bill in the package by a 26-12 party-line vote, drawing an immediate rebuke from union leaders across the state, who called it an assault on collective bargaining rights. In the Macomb County delegation, Republican Sens. Jack Brandenburg of Harrison Township and Tory Rocca of Sterling Heights supported the measure, while Democratic Sen. Steve Bieda of Warren was opposed.

Brandenburg said several urban areas of the state, especially Detroit, are in “bad shape” and will need a state-appointed emergency financial manager, or EMF, who can impose strong medicine.

“He has to have the backbone, he has to have the power, to null and void a contract,” Brandenburg said.

The senator also rejected claims by Democrats that the bill will destroy Michigan’s long history of local control by allowing the EMF to remove top administrators and elected officials, put millage increases on the ballot, lay off employees, slash services, and merge the city or school district with a neighboring government entity. Brandenburg said the EMFs will be deployed in communities that need “financial martial law.”

“Local control? I’ll tell you what, I think that in a lot of these places there is no control,” he said.

via Michigan Senate passes emergency manager bills – dailytribune.com.

The unions are worried about losing collective bargaining rights?  What about citizens being worried about losing their voting rights?

I read this on the Ides of March, the day the Roman Republic–a free, constitutional, representative government that lasted 500 years–made its last futile effort to stay alive, slipping instead into an authoritarian absolutist  Empire.

The thing is, the jettisoning of the republic was for good reason. It had become corrupt, incompetent, and ineffective in dealing with the problems of Rome, including its financial problems.  Julius Caesar made himself into a dictator to address those problems.  He was very effective.  The people loved him for it.  And so were willing to give up all of their political freedoms.

Is this where we are headed?  Does political freedom just not work anymore, being unwilling to make hard and painful decisions?

Am I missing something?  Can anyone–preferably including people from Michigan–justify this on other than purely pragmatic grounds?

I am completely sympathetic to the comment on local control that in these cases of runaway spending “there is no local control.”  Can’t citizens be motivated to govern themselves, or is representative democracy hopeless and we had better find ourselves a Caesar who can get things done?


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