It’s true. The United States government is a broken machine. It feels like just yesterday when the Democrats and the Republicans could not agree on a budget, and the government was shut down. But it wasn’t yesterday. It was 2013, and the suits in Washington promised they would never do it again. But it looks like never again is coming sooner than we think.
Once again, it appears Congress can’t agree on a U.S. Budget by the deadline that is the start of the 2016 fiscal year. If they shake hands and get past their difference, the government will not shut down. The blame game has already started in Congress, and while they are throwing stones at each other, economists are shaking their heads in disbelief. How could a group of educated Americans be so short-sighted when it comes to agreeing on how to spend the trillions of dollars that pour into the treasury every year? That is the question economists like Christian Broda on valuewalk are asking and for good reason. Broda a former economics professor at the University of Chicago and managing director of Duquesne Capital Management thinks the economic ramifications of a shutdown will be felt next year.
Christian Broda studies situations that impact investments and the economic well-being of the country, and he and other economist think the Obama is correct when he says sequestration is hurting our domestic economy. Sequestration is the automatic spending limits set by Congress that stop spending if it is exceeding the limits. Obama wants to stop those cuts, but the Republicans want to keep them. Another issue, according to Broda is the funding for Planned Parenthood. Planned Parenthood is the health provider that provides services, and one of those services is abortion. Obviously the Republicans are making a political issue out of funding for Planned Parenthood, and they will risk shutting down the government to prove their point. That sort of leadership is schoolyard leadership at its best, according to Broda and other economists.
In 2011, a special committee was set up to find ways to reduce spending, but the committee couldn’t agree, so caps or limits were placed on military and domestic spending. The Budget Office claims spending will increase more than $980 billion by 2025 if those limits are lifted. Some Republicans want to get rid of the limits especially on military spending, and some Democrats want to get rid of them too, but the consensus is the limits help keep Congress in check when it comes to writing checks for unnecessary expenditures. The economists think the government should be cutting spending across the board in order to keep inflation in check, but there are no economists sitting in Congress.
The main issue with shutting down the government now is the fragile global economy. The United States can’t afford another glitch in their economic future. Most economists like Christian Broda think Congress should be finding ways to increase our economic position in the eyes of the world, not reduce it.