The US budget conflict takes a surprising turn: Democrats and Republicans have quietly agreed on a budget plan. But the real problems are just being postponed, financial expert Stan Collender told DW.
DW: This cease-fire in the budget battle came as a surprise for many people. How did you react?
Stan Collender: From the beginning, this deal was always going be small and nothing so big that it was going to generate massive amounts of political opposition like most of the other deals that Congress and the President have tried over the last three or four years. So the fact that they came up with a cease-fire as you call it makes a great deal of sense. What this does is that it essentially puts the budget off the highest-priority list for the next couple of years. So it almost eliminates it as a big issue until after the next congressional election is over in 2014.
Do you mean that Congress is giving itself a breather in order to focus on these elections?
It's not so much that they need a break. It's that the budget was proving to be an issue that wasn't helping anybody politically, particularly Republicans who were taking it on the chin politically. So they decided - and I think the Republicans did in particular - that they would give on a couple of key areas and just put the budget away as an issue. It just means that they can focus more on Obamacare as an issue than on the budget.
Will it have a positive economic impact?
Well, it actually doesn't do much for the US economy. It reduces the deficit by a small amount over two years, almost virtually insignificant. What it does do is that it takes away the uncertainty that we've had over the last couple of years, of the possibility of government shutdowns and sequesters - the special automatic across-the-board cuts when Congress and the President can't agree on something. It eliminates the threat of those types of things. So that should make it a little bit easier for American businesses to figure out what they want to do without having to worry about what Washington might do to them.
For many people, the bad news is that there will be no noteworthy drop in the massive debt. How do you see this?
This deal actually does nothing to reduce the debt and it only marginally or just by a small amount reduces the projected increase in the debt because it just makes small reductions in the deficit. This deal was never designed to be that kind of grand bargain. They tried to do that. They tried to come up with a big tax increase and a big reduction in Medicare and social security. They would have gotten no deal. So, yes, the debt is still a big deal and it's still a problem. But it's going to become less and less a problem over the next couple of years. If the US economy grows as projected, the deficit will become a smaller percentage of GDP. By 2018, it will be at the point where most economists would say: don't worry about it. The real problem is that starting in 2019 or 2020, the deficit will rise again as social security and Medicare expenditures go up (when the post-war babyboomers retire - the ed). So in other words, Congress and the President are saying: we'll deal with this at another time. Of course 2018, 2019 or 2020 is when another president and another Congress will deal with it.
Is the budget deal an indication that Democrats and Republicans are now working together better?
No, no. no. It is important, maybe critical that you don't read too much into this agreement. They were able to come up with what looks like it would be a bipartisan agreement supported by both political parties in both houses because they kept it small and dealt with non-controversial items. This says nothing about the ability of the two parties to work together when there are controversial items. Anybody who reads into this any more than that, anyone who thinks this is the beginning of an era of bipartisanship, just does not understand the American system of the government. It is every bit as hyper-partisan as it has been for the last four or five years - and will continue to be that way for another four or five years.
Is this agreement over the budget the end of a long drama or do Americans need to expect more?
There will be considerably more drama on the budget over the next couple of years. Remember, this is just a small part of it. It doesn't deal with debt ceilings, individual spending bills or tax reform. This just takes some of the bigger threats away. This is barely a small battle in the overall war on the budget. This will continue to be something that Washington will talk about and use as an issue for years to come.
Stan Collender is a leading expert on the US budget. He has worked for both the House and Senate budget committees, as well as for numerous financial companies, federal agencies and nonprofit organizations. Collender is a partner and director for financial communications at the PR company Qorvis.