March 3, 2024

Tilting at Budget Windmills

By Stephen Tuttle | Sept. 30, 2023

By the time this column goes to print, the federal government could be shut down. Or, more rational voices within the Republican party will have been heard and at least some sort of stopgap budget deal will have been made to keep the government running.

This trip to the edge of an economic cliff now occurs with troubling regularity. Some, especially a certain former president, believe a shutdown would be a good thing politically, with the blame falling primarily on President Biden. But Senate Minority Leader Mitch McConnell is right when he suggests the blame will fall on Republicans because it is their most extreme wing refusing to compromise.

Some of those demands have included an end of aid to Ukraine and most other foreign allies; an end to spending on COVID education, prevention, and treatment; greatly reduced budget for the Department of Justice and Department of Education; reductions in the social safety net including what are typically called food stamps; and, most improbably, a balanced budget.

None of that is very likely, and some of it is practically and politically impossible. Threatening a government shutdown while tilting at windmills is especially foolish and destructive.

Let’s take a look at that federal budget some insist be balanced. It sounds completely logical but isn’t. According to U.S. Treasury Fiscal Data, the government took in slightly more than $5 trillion (that’s $5,000,000,000,000) in fiscal year 2022 but spent just under $6.5 trillion—quite a bit of overspending. How do we spend it?

Almost 56 percent of that $6.5 trillion is spent on Social Security (19 percent), defense and veterans (16 percent), Medicare (12 percent), and Medicaid/food stamps (9.5 percent). That’s four budget items consuming well more than half, and, as we stagger into an election year, there is not now any appetite among any congressional majority to cut any of that spending.

So the budget-balancers will have to find $1.5 trillion to cut not from the $6.5 trillion total, but from 44 percent of it, or less than $2.9 trillion. What does that money include? Transportation, like highways, rail, air travel, and airports. Then there’s federal money for the federal public education bureaucracy and money to the states for K-12 public schools, community colleges, and four year colleges and universities. There is a federal Department of Health Services and federal money given to state health departments.

We also spend money on foreign aid, but it’s a comparative pittance, less than $65 billion for non-military aid. According to the Kiel Institute for World Economy, a German organization that keeps track of such things, we’ve thus far spent an additional $75 billion in humanitarian, financial, and military aid to Ukraine.

A government shutdown means most non-military departments will be closed. National parks and monuments will be closed, government offices will be shuttered, highway construction and maintenance will grind to a halt. Social security checks will continue to be disbursed, and the Postal Service, which is not technically a government agency, will continue delivering mail. But federal employees will not be paid, including air traffic controllers, who will be required to keep working without compensation.

There are 2.2 million Americans working in civilian positions for the federal government in those various departments, so there will be plenty of economic pain to spread around.

The last time the federal budget was balanced was 2001 when George W. Bush was president. It continued a budget balancing routine started in 1998 when Bill Clinton was president and Newt Gingrich was Speaker of the House. The budget was also balanced in 1999 and 2000 before it blew up in 2002. Since then, Bush, Barack Obama, and Donald Trump all spent well into the red, an overspending tradition being upheld by Joe Biden.

Those intent on balancing the budget have a lot of cutting to do, and that’s a problem. What departments will they ax or bleed nearly dry? Which federal workers—our friends and neighbors—will lose their jobs? Those workers are all constituents of some member of Congress, and slashing jobs during an election year in somebody’s home district or state isn’t typically popular.

The cascading impact of that many lost jobs—it would have to be in the hundreds of thousands to have the desired budget balancing impact—would hurt communities large and small. Restaurants, grocery stores, and retailers of all sorts would lose business, and there would be home foreclosures and vehicle repossessions.

A government shutdown is, or could have been, a temporary disaster caused by recalcitrant extremists who demand getting their way or else. The economic pain caused by futile negotiating tactics employed by the we-demand-everything crowd would at least be temporary. But the economic and employment amputations required to balance the next budget would be permanent, and permanently destructive.

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