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OP-ED: A looming budget conflict in the US

  • Published at 07:43 pm November 26th, 2020
white house
Photo: REUTERS

Will there be another government shutdown?

The budget process in the US is quite different than in Bangladesh.  The Bangladesh budget is presented to parliament in early June of the July-June financial year.  

The budget contains the programs that the government intends to implement, both current spending and investments, mostly the Annual Development Program. The budget also contains changes in the revenue laws and the program for financing the deficit.

The budget is considered by parliament and largely accepted with a few small changes. In recent years, parliament has more or less accepted the budget and not been in disagreement with the government. In brief, following Westminster rules, parliament has a modest input into the budget process, and the government does within broad limits what it wants.

The American system could not be more different. From the founding of the republic, Congress is suspicious of the intentions of the president, and also is sensitive to the wish of the people to have taxes as low as possible.  

The American fiscal year is from October 1 to September 30. The president submits a budget to Congress typically in February for the fiscal year starting in October. There is no revenue component to the budget. Changes in the tax laws are completely separate.  

Congress is meant to pass a resolution that determines the total expenditures, estimates the taxes, and hence the deficit. US government expenditures are divided into two categories -- discretionary and mandatory. 

Mandatory are items such as Social Security that Congress does not have to re-authorize every year. Mandatory items are usually linked to a trust fund; money goes into the trust fund from some tax or fee that Congress has legislated. The administrators take money out of the trust fund following the rules established for payments.  

If the trust fund gets too low, Congress will act to increase the funds flowing in or reduce the payments to be made out of the trust fund.  But this is separate from the budget that covers discretionary expenditures.

Discretionary expenditures are all expenditures of the government that have to be approved (appropriated in budget language). Approval of expenditures is divided into 12 different parts corresponding to the 12 House sub-committees that review and recommend to the House what should be approved. Congress plays a very large role in how money is spent.  

Often, the House ignores the president’s budget. The sub-committees have staff that are experts in the details of the budget and can help the members of the House to understand the issues.

In recent years, Congress has not been able to pass all of these 12 appropriation bills on time. This usually means there is passed a continuing resolution that instructs the president to spend money in the same way as was previously approved. This procedure usually works very well.  

However, if the president has an item that he wants included and the Congress does not agree, there may be no continuing resolution, and the government has to stop until Congress and the president can agree.  

The last breakdown came in December 2018. Trump wants funding included for his wall along the Mexican border, and Congress would not agree. In that case, some of the appropriation bills had been passed, so those departments were able to continue in a normal manner. 

But others had not passed, and the employees of those departments were sent home. When agreement was finally reached, they would be paid for the time they did not work. Some employees are more or less required to work (such as the US ambassador to Bangladesh), who are considered essential workers and are expected to go to work. 

However, no one is paid until the dispute is resolved. In the last breakdown of funding the government in 2018/2019 the government workers could not work for 35 days. The essential workers who did work were not paid for more than a month. 

Trump never his get his money for the wall approved by Congress.  The shutdown ended when Trump realized he was losing the support of the American people.

Now we face another possible government shutdown. On December 11, 2020 the authority to spend money ends. If a continuing resolution is not passed before that date, then there will be a shutdown of the government right at Christmas time and a stop of salary payments to most government workers until there is spending authority.  

Common sense tells us that no one gains from shutting down the government. There is urgent need for a further stimulus program but there seems to be agreement by congressional leaders that this should be managed separately from the funding of the government.    

Then there is the question of how long should funding be continued.  During the 2018/2019 shutdown the blame seemed to be directed at the president’s political party, so eventually Trump agreed with the continuing resolution.

How will the Democrats see this? Biden will probably argue for resolving this and aim at the longest period for the settlement as possible.  

What about Trump? The more rational approach would be to settle the government financing and concentrate on the election of the two senators in Georgia.  

But we have all become used to the bizarre choices that Trump makes. If he causes a closure of the government by demanding concessions, that will cause future difficulties for Biden. Trump may find this a satisfactory outcome. Closure during the transition period would cause considerable chaos. The work on the transition is already behind schedule and closing the government down will give Trump an excuse to do little to help Biden.

The government closure can be continued all the way to the inauguration. Trump would be pushing it and the Congressional Republicans might turn against him.  

What happens on this point is a peek into the mind of a guy many believe mentally unbalanced. If he gets the government funding settled easily, then it means that Trump still has some control over his mind. But if he pushes to close the United States government, it exposes a mind twisted into knots of cruelty, revenge, and violence.  

Forrest Cookson is an economist who has served as the first president of AmCham and has been a consultant for the Bangladesh Bureau of Statistics.

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