The Minnesota shutdown draws to a close after a very long month for many Minnesotans. Once all the details were hammered out in the five days of closed-door negotiations between Republican leadership, Committee chairs, and the Dayton administration a special session was called Tuesday 7-19-11 at 3p.m. The session went throughout the night, ending with Gov Dayton signing the legislation 9a.m. Wednesday morning.

The budget deal came after Dayton agreed to the GOP budget as proposed before the shutdown with some changes. The Governor agreed to not raise taxes and instead adopt the Republican proposal to delay school aid payments and sell bonds based on future proceeds from the state’s settlement with tobacco companies totaling $1.4 billion in one-time money. The Republicans agreed to Dayton’s terms and dropped the social issues, let go of their proposed 15 percent reduction in the state’s workforce, and agreed to assemble a $500 million bonding bill.

Some of the social issues that will be dropped include the Baby Pain Bill, which would have stopped abortion after babies can start to feel pain, banning funding for stem cell research,  public employees’ bargaining rights, and the Voter ID Bill.

In a press release from Majority Leader Senator Amy Koch, Speaker of the House Kurt Zellers (R-Maple Grove) said, “This budget accomplishes what we set out to do: it does not raise taxes, cuts projected spending by $2.5 billion and bends the cost curve of unsustainable state spending. Our economy will be stronger as a result of not increasing taxes on businesses and job creators.”

In the same press release House Majority Leader Matt Dean (R-Dellwood) said, “We looked at every area of the budget for reform to reduce costs and improve service delivery. We didn’t cut for the sake of cutting but for the preservation of sustainable services that meet the evolving needs of Minnesotans. Our nation-leading reforms, particularly in the area of health care, will serve as a model for other states.”

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While Minnesota is quickly approaching a July 1^st government shutdown, Governor Mark Dayton refuses to call the Legislators back for a special session. The budget passed by the Legislature not only increases spending to the highest levels Minnesota has ever seen, yet balances the budget without raising taxes. So why did the Governor veto it? He did so because he wanted to add in an extra $1.8 billion in tax increases, which only 8% of Minnesotans want.

The state constitution states no bills can even be considered until the governor calls the Legislature into special session. So the bill written by the House Republicans to continue current funding levels until a deal is made, cannot even be heard. According to recent article by the Examiner, Republicans have been attempting to reach across aisles and work together by offering to match the Governor’s budget on K-12 Education, the courts and public safety. However, if Gov. Dayton isn’t willing to call a special session to pass those bills plus the Transportation Bill, then many jobs will be lost. The reality is that over 20,000 jobs could be kept by just signing the Transportation Bill that works on the dedicated funding.

In an article by the Chanhassen Villager, Senate Tax Committee Chair Julianne Ortman asked, “Why wouldn’t he just agree to our $34 billion budget? It’s the largest state budget we’ve ever had, and it funds all of the state’s essential services. If there’s something critical that we haven’t funded, let’s talk. I think our budget does fund everything that’s critical. I question the governor when he says that he’s really concerned about those folks, but he’s willing to hold them hostage to a tax increase of $1.8 billion. It’s not right.”

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First, we all know that Republicans, as well as Democrats, have spent a lot of our money. However, it seems the GOP is slowly trying to turn the ship around, with the help of continued pressure from grass-roots conservatives represented by the new freshmen.

But Democrats? After refusing to follow through with their constitutional responsibility to pass a budget last year, many of them have suddenly become indignant that their pet programs may get cut. In short, the nation’s fiscal plight is not seeping in.

Democrats are being dragged, kicking and screaming, to the cutting trough as they still attempt to convince unthinking Americans that Planned Parenthood doesn’t perform abortions at taxpayer expense, and that, if Planned Parenthood is defunded, women will die, or, as Rep. Louise Slaughter says, be “killed” by Republicans.

In this budget showdown theater, the Republicans clearly have had their share of problems, but the liberal Democrats are acting like bratty teens who have maxed out their parents’ credit card and are whining that the fact that the card has been shredded is denying their “freedom.”

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There were reports about 10 days ago that the crowd in Washington reached a budget deal, for the remainder of the 2011 fiscal year, with $33 billion of cuts. That number was disappointingly low. I wrote at the time that if this was a kiss-your-sister deal, we didn’t have any siblings that looked like Claudia Schiffer.

knew it was unrealistic to expect the full $61 billion, but I explained that $45 billion was a realistic target.

We now have a new agreement, which supposedly is final, and the amount of budget cuts has climbed to $38 billion. So our sister is getting prettier, but she still isn’t close to being a supermodel. Here are the highlights (or lowlights) from the New York Times story.

Congressional leaders and President Obama headed off a shutdown of the government with less than two hours to spare Friday night under a tentative budget deal that would cut $38 billion from federal spending this year. …the budget measure would not include provisions sought by Republicans to limit environmental regulations and to restrict financing for Planned Parenthood and other groups that provide abortions.

As with all deals (such as last December’s agreement extending the 2001 and 2003 tax cuts), there are good and bad provisions. The good news is:

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Washington shutdown fears are sinking the U.S. dollar, according to some news reports. Surely there’s something to this, as investor confusion rises and confidence falls, and as Washington seems to be gridlocked over a few billion dollars.

Frankly, the GOP could easily declare victory and accept a $35 billion to $40 billion spending cut for the final strokes of the 2011 continuing resolution. This kind of deal would move the domestic discretionary baseline back towards 2008. No mean feat.

Over ten years, estimates range above $400 billion in real cuts in the level of those domestic programs. Considering where the process started — with the failure of the Democrats to propose a budget, and then the early Democratic response of only $5 billion in CR budget cuts — the GOP has come a long way in the absolute right direction.

So from here the GOP could move from billions in CR cuts to trillions in cuts in the Paul Ryan budget.

Yet however this works out, the principal cause of the declining dollar is not a threatened government shutdown. It’s the excess money creation of the Fed, which is falling further and further behind the international curve of currency stability.

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On today’s edition of Coffee and Markets from the Sammies in Chicago, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the political and economic costs of a potential government shutdown.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Time’s up: Obama and GOP scramble to halt shutdown
Congress doesn’t shut down during a shutdown
Budget negotiators differ by $6.5 billion: aide
The Chicago Mercantile Exchange
ICYMI: Coffee & Market’s 300th Episode with Michael Barone
The Sammie Awards

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Rather than accept a few billion in budget cuts (read rounding error), President Obama has signaled his willingness to shut down the federal government. (Yah!) For those keeping score at home, any government shutdown that happens is on Obama’s plate. He is the President. All on him.

The worst part of this whole debate is the Obama Administration’s decision to hold military pay hostage to the budget debate. For the last few decades, government shutdowns have been guided by an OMB directive issued during the Reagan Administration. Under this directive, military personnel would continue to receive the paychecks while politicians argued about the budget. The Clinton Administration, during the last government shutdown, kept the paychecks flowing.

But, not Obama.

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As readers of Big Government know, an impasse over a few billion dollars in proposed spending cuts threatens to shutdown the federal government. (And, by a few billion dollars I mean, rounding error.) As regular readers should also know, I’ve come to embrace a shutdown, rather than fear it.

As this recent Congressional Research Service report explains, if the government were to shutdown, an OMB Directive issued in the 1980s (along with a handful of legal opinions) guide what parts of government continue to function and what parts must close down.  Short story, all of the important functions of government, i.e national security, the military, air traffic control, border security, Social Security payments, etc., will continue to function. The parts that have to shut down…well, lets just say they are candidates for permanent cuts. I mean, if the country functions for several weeks without a few hundred thousand ‘non-essential’ employees, couldn’t we probably function without them forever? I’m not saying every one of these jobs should necessarily be eliminated…but it isn’t a good place to start?

Sensing the potential PR nightmare from this, it seems the Obama Administration may have decided to raise the stakes on a shutdown. According to draft guidance from the Pentagon, the Obama Administration will require military personnel to report to work…but, will hold their paychecks until the impasse is resolved. As Government Executive explained in a March 15th article:

Military personnel and exempt Defense Department civilian employees are required to continue working without pay during a government shutdown, according to guidance from the Office of the Secretary of Defense.

In a memo prepared earlier this month, Defense officials noted that service members and some civilian workers, including those involved in national security and the protection of life and property, still must report for duty but will not be paid until Congress appropriates funds to reimburse them for that period of service. All other employees will be furloughed, the memo stated.

Military personnel are not subject to furlough.

This is new.

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On today’s edition of Coffee and Markets, Brad Jackson is joined by Rory Cooper to discus a possible deal in the House to avoid a government shutdown. Then Pejman Yousefzadeh talks about what a shutdown could mean politically.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:
Budget Negotiators Reach Tentative Deal To Avert Government Shutdown
Heritage: Freshman Lawmakers Make the Case for Government Spending Cuts
Understanding the numbers in budget talks
Lots of Talk, But Shutdown Still Looming
Howard Dean: Democrats Should Be ‘Quietly Rooting’ for Shutdown

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According to news reports, Democrats and Republicans are unlikely to reach any sort of budget agreement before April 8, when a short-term spending bill for the current fiscal year expires.

Barring some new development, this could mean a shutdown of the non-essential parts of the government.

This makes both sides very nervous. Democrats don’t want the spending spigot turned off and are worried that voters might conclude that there’s no reason to ever re-open departments such as Housing and Urban Development. Republicans, meanwhile, mostly worry that they might look unreasonable and get blamed if certain parts of the government are mothballed and voters can’t get passports or visit national parks.

Given this state of play, what’s the best strategy for fiscal conservatives, libertarians, and other advocates of smaller government?

Fred Barnes of the Weekly Standard thinks Republicans should continue with short-term spending bills.

…the incremental strategy is working. Republicans have passed two short-term measures to keep the government in operation since early March while slashing $10 billion in spending. At this rate, they would achieve the target of GOP congressional leaders of lopping off $61 billion from President Obama’s proposed budget in the final seven months of the 2011 fiscal year. There’s every reason to believe the incremental strategy would continue to succeed.

He’s worried that a more confrontational approach, where the GOP passes a take-it-or-leave-it spending bill, might backfire – even though any shutdown would exist solely because Senator Reid and/or President Obama refused to act.

Would a shutdown give Republicans more muscle in negotiating for cuts? …Maybe it would. But it might not. …So long as they control the Senate and White House, Democrats will reject massive cuts. Republicans also want to bar spending for Planned Parenthood, the Corporation for Public Broadcasting, and Mr. Obama’s health-care program. Attach any of these prohibitions to a spending measure and Democratic opposition is certain. Should Republicans insist, we’ll get a government shutdown. This is a big gamble. …Indeed it might discredit Republicans and boost Mr. Obama in the same way the shutdown in 1995 hurt Republicans and lifted President Bill Clinton out of the doldrums. It could alienate independent voters so critical to the Republican triumph in 2010. True enough, the political atmosphere is more favorable to serious spending reductions than it was 16 years ago. …But why take a chance?

I think Barnes is a bit off in his portrayal of what happened in 1995, as I’ve previously explained, but these are all fair points. A “shutdown” fight could be considered uncharted territory.

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Among advocates of limited government, there is growing unease about the fiscal fight in Washington.

This is not because anything bad has happened. Indeed, Democrats thus far have been acquiescing – at least on a temporary basis – to conservative demands for $61 billion of spending cuts over the rest of the current fiscal year. This is remarkable after 10 years of endlessly expanding government.

Here’s what Jennifer Rubin wrote at her Right Turn blog.

A senior Senate adviser wisecracked, “A month ago, they said they couldn’t possibly cut a dime. Then they said the $4 billion [in] cuts in the first CR were a non-starter. Now they’re bragging about cutting spending?” It is a remarkable turn of events and another sign that Reid was bested in this round of budget battling. Twice now he capitulated to House Republicans.

This analysis is right, and it is very similar to what I wrote back on March 2 regarding the first short-term agreement.

So why, then, am I worried?

I’m nervous because the fiscal fight is evolving in a bad direction. In that March 2 post, I warned that “Republicans should be very careful about having their energy dissipated by a series of diversionary battles over short-run spending bills.”

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Americans delivered the House a record 63 Republican seats to ensure that the peoples’ voices would be heard.  And, while the voters thought their message was clear and received, now, it seems, the real battle ensues.

While Congress continues to kick the budget and debt can down the road and passes continuing resolutions to thwart a government shutdown, the Democrat leadership has dropped several messages to the GOP leadership:

“They cannot agree with themselves,” said Hoyer. He called for Speaker John Boehner (R-Ohio) to distance himself from Tea Party conservatives and forge a compromise between centrist Republicans and Democrats.

Hoyer said Boehner should abandon the additional cuts conservatives muscled into the bill introduced by GOP leaders that would have cut $35 billion in spending this fiscal year, which ends Sept. 30. After an uproar from conservatives, GOP leaders rallied around a bill that would cut spending by $61 billion.

Of course he would say that.

This is not 1995 though and the game has changed, and frankly so have the rules.

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A large number of Democrats voted with Republicans in the House yesterday to pass a two-week spending bill that includes $4 billion in cuts compared to what Obama requested.

This is a modest victory for the GOP since they can truthfully claim that they are on target to impose the equivalent of $100 billion of cuts over a full fiscal year.

And it appears the Senate will go along with the House proposal, as reported today by the Washington Post.

The deal, which eliminates dozens of earmarks and a handful of little-known programs that President Obama has identified as unnecessary, sailed through the House on a 335 to 91 vote. Senate Majority Leader Harry M. Reid (D-Nev.), who initially resisted including any cuts in a short-term funding extension, predicted that it will pass that chamber as early as Wednesday.

Some people correctly note that a $4 billion cut is trivial since government spending has ballooned by $2 trillion during the Bush-Obama spending binge – especially since at least some of the supposed spending cut is based on the dishonest Washington practice of measuring “cuts” on the basis of how much Obama wanted to spend rather than nominal changes from one year to the next. Nonetheless, it is a very positive development that the conversation has shifted from “how much should spending be increased?” to “how much should spending be cut?”

That being said, the battle is far from over. Indeed, the GOP began the 1995 shutdown fight in good shape. As I explained in a recent National Review article, a significant number of congressional Democrats sided with Republicans and it appeared that Clinton was on the defensive.

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The potential government shutdown is not just history repeating itself between a Democrat President and a Republican House.  It’s also a repeat of a key role played by government employee unions.

What’s different now is that the public has awakened to how they’ve been duped with false promises about big government.

In the 1995-96 shutdowns, the public worker unions reportedly played a huge role behind the scenes; today their role has been brought into the open, becoming common knowledge even before the mass union protests at the Wisconsin state capitol.

President Obama’s allegiance toward government unions is well-known.  The failed $800-billion stimulus was mostly about protecting government jobs.  His minions in Organizing for America have orchestrated the Wisconsin protests, which Obama labeled “an assault on unions.”  And it’s well-known how the unions spent $400-million for the 2008 election.

That’s the backdrop as House Republicans insist on billions in spending cuts before they will approve funds for the rest of government.  The House spent long days and nights in session to create their plan; the Senate Democrats sit inactive instead, criticizing lots but doing nothing.

So the action comes from the public workers, as their demonstrations provide visual proof of who wants big government to continue unchecked.  Their key role was behind-the-scenes in the 1995-96 shutdowns, but every bit as vital.

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As the battle of the budget wages on, the March 4^th D-Day moves inexorably closer, and with the Continuing Resolution passed in the House of Representatives early this morning, including two amendments by Rep. Steve King (R-IA) to defund Obamacare, the media is increasingly raising the specter of a possible government shutdown. What every Republican, every patriot, every person conceivably affected needs to understand is how this will impact average Americans.

Will airports shut down because air traffic controllers have gone on leave? Will those mean Republicans throw granny out in the street when Social Security stops sending payments? Will everyone who receives checks in the mail see their income dry up because the Post Office shuts down?

The Democrats will tell you that and more. A Google search of “government shutdown” brings up pages describing dire consequences. But if you follow the links you will see that this is more a reflection of leftist web domination than anything else.

The greatest consequence of a government shutdown will be the Democrat-generated media hysteria we will have to put up with unless/until they get their way. They will demagogue at every opportunity, describing fantastic scenes of nationwide anarchy. They will do what they always do, about the only thing they do well, and in fact have already begun doing:

They will lie.

President Obama almost immediately threatened that Social Security checks would stop coming.

He lied.

Think Progress, the archetypical radical left propaganda rag, interviewed freshman Republican Rep. Mike Kelly (R-PA), who pooh poohed worries about a government shutdown. They didn’t ask him to qualify, but later attempted to discredit his message:

Kelly’s assertions are simply not true. One need look no further than the federal government shutdown of 1995 for proof. During the nearly four-week shutdown, Social Security checks were not mailed and Medicare/Medicaid reimbursements were disrupted.

They lie.

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Just how unusual is the current spending debate on Capitol Hill? Based on the size and scope of the GOP’s proposed cuts, House Majority Leader Eric Cantor (R-Va.) said you’d have to go back to World War II to find such reductions in federal spending.

Spending debates in Washington usually end the same way — with more federal spending. The federal government today spends more on a per-household basis than ever before — a staggering $31,088.

That number is expected only to increase in the years to come. It’s one reason Republicans prevailed in November and why they’ve made spending cuts one of their first acts of the 112th Congress.

As the focus shifts from the size of the cuts to a defense of them, expect to hear plenty of fear-mongering from Democrats. It started last week when Senate Democrats began floating the possibility of a government shutdown.

Judging from recent comments by Senate Majority Leader Harry Reid (D-Nev.) and Sen. Chuck Schumer (D-N.Y.), Democrats are hoping to reprise the budget battle of 1995. In that case, a Republican-led Congress squared off against a Democrat president — and the GOP lost.

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On a historic night this past Thursday, a new Tea Party Republican Congress completely transformed U.S. economic policy. Elections matter, and so do their ideas. Smaller government, low taxes, and less spending were key election themes in the Republican landslide. And those themes triumphed this week as a large tax-cut bill finally passed the House and a monstrosity of a spending bill was defeated in the Senate.

In one fell swoop, Obamanomics is out the window. Reaganomics 2.0 is now in the driver’s seat.

Perhaps the most amazing part of the story was the work of Mitch McConnell and John McCain (among others) to kill the 2,000-page, $1.2 trillion omnibus spending bill in the Senate, along with its 6,600 earmarks totaling $8 billion. This budget monster dripped with contempt for voters and taxpayers. But business as usual was overturned.

I had an inkling of this when Sen. McCain told me in a CNBC interview earlier that night that, if need be, he would favor a government shutdown over passage of the spending bill. And now, under a short-term continuing resolution, the whole current-services budget baseline can be lowered by anchoring it to 2008 spending.

Hundreds of billions of dollars can be saved, producing a smaller government that will be, in effect, a tax cut for the private economy. And the symbolism of overturning massive spending only two years after Obama’s debt-laden stimulus package is enormously important.

Of course, the tax deal is far from perfect. But low tax rates will be preserved for personal incomes, capital gains, dividends, and estates. This is pro-growth and pro-capital formation, and it’s a confidence builder, too.

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