Budget like it’s 1995

With Congress showing little sign of being able to agree on a budget, the battle has now shifted to authorizing a temporary extension of the government’s ability to spend money without a budget. Without such an extension, most government spending would have to stop, throwing the country’s finances once again into chaos. And even if an extension is passed now, it would expire Nov. 19, forcing a replay of the whole ugly spectacle.

A similar situation occurred in 1995, the year I returned to Congress after a special election. Then, as now, the Sept. 30 date for the end of the federal fiscal year was reached without any appropriation bills having become law. For another month, Congress passed “continuing resolutions,” or short-term laws that continued the government’s ability to spend at existing levels.

Then, in November, President Clinton announced that he would veto future resolutions if they did not authorize spending at higher levels. Some programs (like Social Security) were on automatic appropriations and so could continue normal operations; but most (as is the case today) were not.

Federal agencies and departments suddenly found themselves without the funding they needed to operate normally. Medicaid payments were interrupted, and programs for veterans were cut off. Defense spending was hard hit. Nonessential workers were furloughed. The shutdown rippled through private industry too. Tourism was hit hard because visas and passports weren’t being approved and national parks were not staffed. Federal contractors couldn’t make payroll.

This year should have been different. When the debt-ceiling deal was reached in July, both sides agreed that the country would spend less in the next fiscal year, with cuts totaling at least $7 billion (a bit less than two-tenths of 1% of the total budget). But now House Republicans have announced they want much deeper cuts than that and will send appropriation bills (or short-term continuing resolutions) forward at those lower levels. President Obama, like Clinton before him, is likely to veto them, assuming the bills even make it through the Democratic-controlled Senate.

In the government shutdown of 1995, the Republican Congress, and House Speaker Newt Gingrich, were the biggest losers. Though the Republican congressional position was reasonable (spend no more this year than last), the Democratic president was able to make the congressional leaders appear heartless and amateurish. They seemed unable to set aside ideology to work in the best interests of the country.

Obama will surely attempt to cast Republican leaders in Congress in a similar light this year. And since Democrats have already agreed in principle to budget cuts, it will be quite possible for him to portray the Republicans as far to the right of the reasonable middle. Indeed, he would almost certainly sign a continuing resolution at last year’s levels (which is what the Republican were asking for back in 1995).

In the autumn of 1995, Clinton was on the ropes. He gave a famous interview in which he pleaded that the presidency was “not irrelevant.” Gingrich was Time magazine’s Man of the Year. Yet Clinton went on to win, substantially, in the next year’s election. How? By running against what was widely perceived at that point to be an intransigent GOP rather than against his actual opponent, the statesmanlike Sen. Bob Dole.

Shutting down the government would be terrible for the U.S. economic recovery. Like the eleventh-hour negotiations on the debt ceiling, a government shutdown would feed the perception of voters that the federal government has become dysfunctional. Consumer confidence, on which any recovery must be built, would plummet.

Republican leaders in Congress do not want to harm the economic recovery. They must also understand that shutting down the government would be suicidal for their party. It would be the GOP misstep Obama needs to rekindle his chance at reelection.

The far wiser tactical choice — one that would also be best for the economy — is for Republicans in Congress to offer the president the same deal they did in 1995: continuing resolutions for spending at this year’s levels. Obama could not plausibly veto them because his original budget called for less spending than that. The continuing resolutions could run until after the November 2012 elections if Congress can’t agree on a budget before then.

This solution isn’t ideal, but it would at least allow government to function for the next year and two months without compelling either side to back down. That’s important — not because the sides shouldn’t compromise but because neither side will compromise. And the economy can’t survive another game of chicken.

There’s another reason avoiding a fight on the budget now makes sense: the budget is a small issue compared with the debt, and the debt decisions have effectively been postponed until after the elections. Here’s why. If Congress doesn’t reach an agreement on debt reduction by Thanksgiving, then automatic cuts of $1.2 trillion (over 10 years) will be triggered. But those cuts won’t kick in until 2013. A stalemate within the congressional long-term debt-reduction committee is almost guaranteed, now that Obama has said he won’t accept entitlement cuts without tax increases and no Republican on the committee will support tax increases. So the automatic cuts are likely to be triggered, but not until after the 2012 elections.

With that timetable for the big decisions already agreed on, it makes sense not to risk a government shutdown over much smaller numbers. The country doesn’t need yet another economic crisis, especially one imposed on us by elected officials. We would be better served by a workable, if temporary, compromise that would allow time for the 2012 elections — and for American voters to send a clear message about which approach they favor.

Tom Campbell is dean of the School of Law at Chapman University and a professor of economics as well as law. He was a five-term Republican congressman, serving on the banking committee and the joint economic committee.