According to news reports, Team Obama and House Republicans are at least $50 billion apart in the budget negotiations for FY2011. I’m willing to bet that Team Obama and Senate Democrats won’t agree to even $20 billion in spending cuts.
And that’s a far cry from the GOP’s annualized $100 billion Pledge to America mark, and an even farther cry from the hundreds of billions of dollars in cuts that are necessary over the next five to ten years. As I recall, the Simpson-Bowles deficit commission suggested more than $1 trillion in cuts to the domestic discretionary baseline over ten years. I think the Paul Ryan plan would do the same.
Surely the Tea Party advocates will push the GOP to stay on message and stay the course. That’s what last November’s elections were all about. And if a satisfactory deal cannot be reached, one that keeps the GOP spending-cut pledge and includes a spending-limit rule with real teeth, then why not shut down the government?
Reading through various reports from the Wall Street Journal and Washington Post, you get the sense that no great harm will come from a shutdown. Social Security checks will be mailed. Other benefit payments will be met. Air-traffic controllers will do their jobs. Border protection and military operations will continue. Uniformed military personnel will be exempted. The Post Office will do its business uninterrupted. And incoming revenues can be designated for interest payment on the debt.
Doesn’t sound that bad to me. It sure isn’t the end of the world.
Back in the early ’80s, when I served in the OMB under President Reagan, we went through several brief government shutdowns. Yes, the Washington Monument and a bunch of public parks closed. So what? Non-essential personnel got a holiday. The rest of us had to work.
But non-essential programs were not funded during the shutdown, and their unused budgets were subsequently rescinded. Savings were significant.
Of course, in the event of a shutdown, the political blame-game will run full hog, like it did during the mid-1990s. But the public mood today is far more hostile to big-government overspending, borrowing, and taxing than it was in 1995. Most important, taxpayers will benefit from a shutdown. That’s the key point. And voters will reward leadership.
So this is a moment when GOP promises to slash spending must be kept.
But let me reiterate: Any budget deal should include some clear rules on budget-spending limitation. Several Republican senators, including Bob Corker and Mike Lee, want to limit federal spending as a share of the economy to around 20 percent. Today it stands at 25 percent. If a proper spending-limit rule were put in place, strict budget-cutting penalties would be automatically triggered when the rule is broken.
This kind of budget rule is essential to any deal. The GOP should not settle for anything less. Why? Because this is the moment. This is the upshot of last fall’s elections.
Governors like John Kasich in Ohio, Scott Walker in Wisconsin, Rick Scott in Florida, Mitch Daniels in Indiana, and Chris Christie in New Jersey are making the good taxpayer fight to curb spending with strict limits on government unions — even if government shutdowns are part of the battle.
The message from the states is clear: Lower spending is necessary a) to stop the bankruptcy and b) to return taxpayer money to citizens, small businesses, and families. Each spending-cut dollar in effect translates to an equivalent tax-cut dollar. That’s pro-growth, pro-jobs, pro-lower-unemployment, and pro-financial-prudence.
But Washington Republicans must join the state-by-state battle by waging their own war against bankruptcy, high taxes, and overwhelming debt.
Frankly, a government shutdown in Washington is a minuscule price to be paid for the greater good of financial solvency and economic growth. If the Republicans can’t get the right deal for full-fledged spending cuts and a clear budget-limitation rule with severe budget-cutting penalties, they should go ahead and shut down the federal government.
Message to House Republicans: Don’t pull your punches. Hang tough. Stand tall.
Larry Kudlow is the host of CNBC’s “The Kudlow Report.”