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Government: The vacuous first round in the fight over budget cuts

February 15, 2011 |  2:11 pm

Listening to members of the House debate a continuing resolution (HR 1) to fund the federal government through Sept. 30, I was struck by how weak the arguments on both sides were. That doesn't bode well for the tough debates to come over the budget and the economy.

The measure would spend about $100 billion less in fiscal 2011 than President Obama requested a year ago. Democrats made two basic points in opposition: the Republicans rushed to make cuts without holding hearings or consulting with Democrats; and the cuts will cause job losses and harm the neediest Americans.

The Democrats' procedural arguments amounted to standing on ceremony, given how little time remains before the government's current, temporary funding runs out on March 4. And their "cuts hurt" argument is a poor fit for the current fiscal state of affairs. The federal government is spending far more than it's collecting in revenue; with private industry back on its feet, the Keynesian rationale for heavy deficit spending just isn't there anymore.

Yes, cutting federal spending will eliminate jobs in the public sector, as well as jobs held by federal contractors and others who rely on Washington's largesse. And cutting aid to poor mothers and children at a time of high unemployment is, as Rep. Barbara Lee (D-Oakland) put it, "heartless and cold." But the Democrats seemed to be arguing that the federal government is the only employer capable of hiring these days, and that's just not true. Why does Washington have to keep the stimulus throttle fully open, after six consecutive quarters of GDP growth?

The Democrats could level the same complaints against just about any cuts of the magnitude the GOP proposed (more on that later). The Democrats need to show other cuts that would be less injurious or more beneficial to the economy, not just complain that the GOP has different priorities. As Democrats were so fond of saying two years ago, elections matter.

Republicans, meanwhile, stumbled over different potholes. The biggest was their assertion, over and over, that the deficit is destroying jobs. Where's the evidence of that? The GOP offered none.

The recession destroyed millions of jobs. It's fair to argue that deficit spending hasn't restored them, although there's a good argument  that the spending kept unemployment from being significantly worse. But the short-term economic risks posed by a large deficit are that it could raise borrowing costs for private employers and that it could crowd out private spending (e.g., by persuading private companies not to provide goods or services that the government is providing). It's hard to argue that either of those things has been happening over the past two years. Instead, the main problem has been the lack of demand for goods and services, which has led businesses to sit on huge piles of cash rather than expanding.

Unless Republicans can make the case that the deficit is the cause of the country's short-term economic problems, rather than a symptom, the timing and amount of the cuts seem arbitrary. Instead, the best argument for deficit reduction is that the red ink is a long-term problem. It is indeed, but the discretionary budget controlled by the continuing resolution isn't the most important factor. Eliminating every "non-security" discretionary program would still leave Washington more than $900 billion in the hole in fiscal 2011.

HR 1 would reduce the deficit by 7% at most. The real dollars are in areas left largely untouched by the resolution -- defense, entitlements and tax breaks.

So what's the point? It's simple: The budget gap is unsustainable, and Congress has to start somewhere. The onus is on the GOP to explain why its choices make sense for the economy. Republicans should start by focusing on programs that shouldn't be a federal responsibility -- such as the $600 million for cities to hire police officers, which the continuing resolution would terminate.

Meanwhile, it's not enough for Democrats to complain that the GOP is destroying jobs instead of creating them. They need to wake up and smell the election results. It's time to come to the table with proposals that would close the budget gap, rather than trying to defend it.

-- Jon Healey

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