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The Real Problem With Funding the Government

April 7, 2011 - by Donny Shaw

After meeting late Wednesday night with House Speaker John Boehner [R, OH-8], Senate Majority Leader Harry Reid [D, NV] took to the floor this morning and said that agreeing on a topline budget number isn’t the thing blocking a deal on preventing a government shutdown Friday night, it’s social policy. “Our differences are no longer over the savings we get on government spending, Reid said. “The only thing holding up an agreement is ideology.”

When the House passed the budget bill, the Republican majority added an unprecedented number of policy riders to it, touching on just about every major political issue you can think of. While budgets always affect social policy, decisions on which programs to cut and which to fund should be made in the regular appropriations process that allows for committee review and public input. Of course, the Democrats failed to complete the appropriations process last year when they controlled Congress, and that’s why we now have to do the budget through a continuing resolution. But that doesn’t justify the Republicans bypassing congressional deliberation and public review now.

For a taste of the policy riders that are currently in the budget bill and preventing the Democrats and Republicans from reaching a deal, I’ve highlighted a dozen or so below. Links go to the actual legislative text of the riders.

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Comments

Displaying 1-30 of 49 total comments.

andresberger 04/11/2011 12:48pm
in reply to fakk2 Apr 10, 2011 5:31am

The government is in charge to create infraestructure that people could use easily to drive profits and that is something very few presidents do correctly.

My blog: http://mozilafirefox.onlynux.com

JoshuaForPresident 04/10/2011 4:34pm

The Republicans have made this a not-too-friendly-democrat Christmas tree bill. Many Democrats will NOT support this bill because of the following:

It cut funding for the new Health Care bill.

Blocking the EPA from regulating green house gases.
As well as blocking the opening internet campaign.

Those clauses will have little to no Democratic support, which will hinder passing this budget bill.

nmeagent 04/10/2011 8:06am
in reply to ebritt Apr 09, 2011 1:53am

ebritt, this ‘critical policy rider’ that you advocate would be a bill of attainder, the passage of which is unconstitutional. What’re you’re suggesting must be pursued in court.

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nmeagent 04/09/2011 10:02pm
in reply to nmeagent Apr 09, 2011 10:02pm

Though it may seem like a minor issue, insinuating that Congress may regulate the internet just because it is not mentioned in the Constitution basically flies in the face of defining characteristic of our particular flavor of federalism. I’m not saying this is exactly what you were getting at, but one of your statements was close enough that I thought I’d chime in.

nmeagent 04/09/2011 10:02pm
in reply to Stubbs Apr 09, 2011 6:34am

Sorry, it’s not personal. There is a great deal of ignorance wrt. the Constitution floating around out there and I’ve just about run out of patience. In my opinion the belief that the federal government is a general government (i.e. only limited where explicitly mentioned) is almost entirely responsible for its growth into the all-encompassing monster that it is today and may contribute to the eventual death of liberty (as we know it). If the federal government may regulate anything and everything not explicitly mentioned in its founding document (despite the fact that the 9th and 10th amendments of that document specifically say otherwise), then there are no realistic limits on its power. Given time and will, even natural rights supposedly protected by the Bill of Rights aren’t safe.

luminous 04/09/2011 11:45am
in reply to luminous Apr 09, 2011 11:44am

I should have listed the FDIC, and the federal pension guarantee corporation as well.

luminous 04/09/2011 11:44am
in reply to fakk2 Apr 09, 2011 10:51am

When I talk about bailouts I include the $23 trillion dollars spent by the Fed in 2007, TARP, Use of fannie and freddi to hide market failures(rule changes in this organizations by the Bush administration in 2007 forced them to buy a lot of junk mortgage bonds).

The depth of the crisis is completely misunderstood, It would have dragged out much much longer, Remember the last great depression wasn’t pulled out until the government engaged in the largest spending spree ever engaged in ever(World War 2). Right along with the highest tax rates ever( 96% on highest bracket ).

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luminous 04/09/2011 9:32am
in reply to eth111 Apr 09, 2011 9:13am

I doesn’t just refer to tax rates, it refers to the idea of making money “cheap”, using outsourcing to reduce costs(aka undermine the wages of people who buy things), undermining regulation especially in the area’s of banking and money.

The overall idea that supply of anything creates its own demand, that is “Voodoo” economics.

luminous 04/09/2011 9:26am
in reply to eth111 Apr 09, 2011 3:18am

The 0% rate has been explicitly set to slow and eventually stop the feedback of loses in deposits at the banks, again it seems to be working, lending is starting to trend back up again, and once most of the banks deposit rates have stabilized they should be able to start pushing that rate back up to counter act the inflationary effect of a low rate(or 0% rate).

luminous 04/09/2011 9:26am
in reply to eth111 Apr 09, 2011 3:18am

We are actually headed towards deflation currently as a result of the contraction of leverage ratio’s and deposits at the banks, The fed is currently using QE2, QE3, zero % interest etc to try and hold back deflation(seems to be working so far).

Remember that due to the leveraging of the banks ever dollar lost in deposits is $15-$30 dollars removed from the lending economy, Now this ratio is shrinking and it should nominally this would be somewhat tied to the leverage ratio required on the banks, but they are still coming back from the idiocy of the 1999 banking deregulation that removed those requirements allowed banks to leverage infinite:1(in theory, 35-45:1 in most cases).

eth111 04/09/2011 9:13am
in reply to luminous Apr 09, 2011 8:45am

It is not a misunderstanding, it is seeing the fractional reserve system for what it is. Creating money out of thin air and thereby decreasing the real value of the existing money in the system.

Fractional reserve banking is predicated thoroughly on the bank being allowed to extend more credit than it has cash on hand – that is creating money out of thin air.

A real money system, not based on fiat currency, is the only way to eliminate the death spiral that our current system is in. As for Reagan’s use of the Laffer curve (what you choose to call Voodoo) was at least an honest attempt to spur the economy into creating jobs. The last two administrations (W and O) have done everything in their power to stifle the economy while pretending that they are doing otherwise – that is voodoo….

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luminous 04/09/2011 9:04am
in reply to eth111 Apr 09, 2011 3:18am

And I don’t want to make it sound like I support Keynesian theory, It has been used to justify some pretty major stupidity.

But its models for how capital move around an economy, CVT, the velocity of capital, etc all seem to be very correct.

What those things are used to justify, the bailouts and such, while they worked to some extent(they did stop the freefall), they haven’t actually reversed the feedback loop of shrinking deposit levels at the banks damaging their lending capacities(tho this does seem to be closing itself over time by itself).

Thank heavens we have plenty of Credit Unions and community banks that didn’t further inflate the stupidity going on in wall-street.

luminous 04/09/2011 8:45am
in reply to eth111 Apr 09, 2011 3:18am

To be clear the Fed hasn’t printed a lot of money, this is an illusion coming from a misunderstanding of how the fractional reserve system works.

Nominally, their are two different ways money can enter the economy, via creation of new money(the way you point out), and via federal reserve discount window where a bank can barrow money up to the accepted leverage ratio allowed to banks(currently 15:1).

The Voodoo economics of Reagan, and the supply side bankruptcy have been the basis of our economic policy for the last 30 years or so, not Keynesian theory(and really this is an evolving theory it is not the same as it was).

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Stubbs 04/09/2011 6:34am
in reply to nmeagent Apr 08, 2011 1:45pm

nmeagent, just as a heads up, the first part of your first sentence is fairly rude. Let’s be cool.

That aside, I bet you could make an argument with the Commerce Clause. Since the original blog post is about the budget bill and the social policy riders in it, I won’t continue a “Constitution argument.” I have a feeling I could never change your mind.

Also, since not that many of the people in power agree with you that most of the federal government is illegal, a shutdown won’t change their minds. It will just make things more expensive, really.

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eth111 04/09/2011 3:18am
in reply to luminous Apr 08, 2011 6:53pm

You’re getting closer to realizing the real truth – the Fed, by incessantly printing money and screwing around with interest rates devalues the dollar constantly. The biggest battle right now monetarily is to see if you can keep up with the devaluation of the dollar. $12000 in 1980 adjusted for inflation is $36000 in 2009. You see the symptom, yet fail to recognize the cause.

Over the last 80 years, the only economic knowledge we have accumulated is that the Keynesian model is a glaring failure.

Based on your posts on this site, I would argue that you are not lacking in intelligence, only information. Please read the actual works referenced above (it appears that your opinion is colored by someone else’s analysis). If one believes that a government that consumes 25% of the GDP is necessary, then economic theories based on the free market will seem like anarchy.

ebritt 04/09/2011 1:53am

H.R. 1 is missing a critical policy rider. The rider that requires reparations from the financial industry that caused the financial crisis and the great recession.

If B.P. has off shore drilling accident, it is required to pay for the damages it caused. I find it ironic that the Republicans want to slash Medicare and Social Security because the financial crisis has reduced revenue to the government.

Americans believe in individual responsibility. The Finanical Industry, through reckless and irresponsible behavior, looted American taxpayers and doubled our deficit. An enterprising Congress member needs to draft a bill requiring the financial industry to pay reparations to the American taxpayers for the havoc it has caused.

Congress is pursuing the wrong agenda. Stop punishing our retirees, the disabled and the unemployed and go after the real culprits. I suggest nameing the bill "The Financial Crisis Reparations Act of 2011. Take away the industry’s tax exemptions.

luminous 04/08/2011 6:53pm
in reply to eth111 Apr 08, 2011 2:28am

“What about the 51% of Americans who pay no taxes? The ones who extract more from the system than they put in?”

The median wage in 1980 was $47,000 dollars and the average wage was $12,000 dollars, The median wage today is $39,000 dollars and the average wage is $35,000 dollars.

Remember to add 30 years of inflation, after you come to the realisation that that real wages are under half of what they where in 1980 perhaps you can understand that 51% didn’t pay(income taxes they are still revenue positive due to payroll taxes which are capped at $107,000 dollars of income) because really they are much closer to the poverty level then you would like to admit(or hell I don’t know anyone that would want to admit to that).

luminous 04/08/2011 6:45pm
in reply to eth111 Apr 08, 2011 2:28am

I don’t buy into the Austrian/Neo Classical economic religions. Their economic “theories”(and I use the term loosely in this case) ignore all of the developments and understanding we have accumulated over the last 80 years or so, typically they follow closer to a ideology of anarchy, racism(in the case of Von mises), and “self evident axioms”.

The theories we have now still have holes in them large enough to drive trains through, but they are much closer to reality to any of the nonsense pushed by Hayek.

In all cases with economic “theory” more often that not it is all designed to prop up the ideological belief of how one wishes or thinks the world should work rather then in fact a serious study of how in fact it does work.

eth111 04/08/2011 4:51pm
in reply to mblockhart Apr 08, 2011 7:33am

Anyone who pays attention knows that it is currently impossible to have an honest debate about any legislation, either in the legislatures or in public. Honest civil debate is a lost art in this country replaced by sloganeering, half-truths, and genuflecting.

The debate that needs to take place, and is attempting to take place, is not about what is right and wrong, but about what is the proper role of government. Planned Parenthood, CPB, Dept. of Ed, all do not qualify as proper functions. The EPA is a tricky one since there are some functions that it should be performing that are proper, but hamstringing corporations is not one of them.

Democracy, which is an over used term in the current sorry excuse for debate, is nothing more than mob rule. 51% of the people can legally usurp the rights of the other 49% simply because they have control.

eth111 04/08/2011 4:45pm

First and foremost, there hasn’t been an actual budget passed since FY2008. The government has been operating on “Continuing Resolution” since October 1, 2009.

Second, when the primary function of the politicians in government is pandering to every special interest group that comes along, whether it be the rich, the poor, the union, the corporations, or the minorities, we get what we have here.

The government’s proper function is to guarantee that each member of society can use their life, liberty, and property as they see fit, unmolested by others. As Bastiat so eloquently put it; "Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place

nmeagent 04/08/2011 1:45pm
in reply to Stubbs Apr 07, 2011 10:36am

If you had read and understood the Constitution at some point in the past you would know that failure to mention something means that the federal government cannot regulate it. The Constitution defines limited powers for a federal government; everything else is left to the states and the people. And yes, before you ask, this does mean that the vast majority of federal government activities are blatantly illegal.

I for one hope the government stays shut down until it obeys its own laws.

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