Filed Under:

How Budget Battles Keep The Economy In Limbo

Play associated audio

Welcome to Fiscal Year 2012...such as it is.

On each Sept. 30, the nation wraps up its old budget, and on Oct. 1, it starts a fresh spending cycle. Or at least, that's what is supposed to happen.

But once again, Oct. 1 has come and gone, and the country still has no formal budget in place. Instead, Congress last week approved a stopgap funding bill to keep the government operating temporarily, just as it has done time and again since the 1970s.

For the more than 2 million civilian federal workers, it has become the norm to start work on the first Monday of October not knowing what will happen to their agencies' budgets: Will there be spending cuts? Will there be money to purchase new equipment? Will there be raises?

In fiscal 2011, Congress did not complete the final budget until April 15, 2011 — a full 61/2 months into the 12-month cycle.

This year, Congress had to punt again. On Thursday, the House approved a stopgap spending bill to keep the government open — until Tuesday. That marked the 157th temporary spending bill used to plug a budget hole since 1977, according to the nonpartisan Congressional Research Service.

When lawmakers resume their work on Tuesday, they will take up yet another spending extension — this one lasting until Nov. 18.

The lack of a final budget is particularly troublesome for the weak U.S. economy, says Diane Swonk, chief economist for Mesirow Financial, a financial services firm in Chicago.

"We're already skating on thin ice," Swonk says. "The last thing you need now is more uncertainty."

Matthew Slaughter, a Dartmouth professor and an economist with the National Bureau of Economic Research, says the annual budget mess hurts the economy in several ways.

First, it dampens the consumer confidence of millions of government workers and contractors.

"To varying degrees, they have to worry about the stability of their paychecks," he says. "That kind of risk tends to make those households more uncertain, and that surely matters" when workers are deciding whether to purchase, say, a home or car.

Slaughter says the budget battles also hurt workers in the private sector.

"The annual drama and the countdowns make people worry about the basic competence of the government, and that hurts overall confidence in the economy," he says.

Budget battles have other hidden costs, Slaughter adds. For example, federal agency leaders who should be developing policies to help the economy are instead "putting their energy into contingency planning in case there is a government shutdown," he says. Also, the most highly skilled federal workers may decide to leave government because they may become demoralized, he notes.

And finally, agencies cannot move forward with major projects that could improve infrastructure, Slaughter says. For example, the Federal Aviation Administration could be delayed in purchasing equipment to upgrade the air-traffic-control system because of budgeting uncertainty, he says.

Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.

NPR

Barbershop: UofL Basketball Ban, Football Concussions And The NFL Women's Summit

ESPN contributor Kevin Blackistone, Bloomberg View's Kavitha Davidson and The Washington Post's Wesley Lowery talk about the UofL basketball team, public opinion of the NFL, and women in sports.
NPR

After Introducing Changes, Keurig Sales Continue To Fall

Despite America's high coffee consumption, Keurig reported disappointing sales this week. Even during its popular holiday selling period, the numbers haven't perked up in recent years.
NPR

On The Clock: Rubio Gets The Most Talking Time In Tonight's Debate

It was the last debate before the New Hampshire primary and Donald Trump was back onstage. Which GOP candidate ended up with the most talking time?
NPR

How Limited Internet Access Can Subtract From Kids' Education

Smartphones are often credited with helping bridge the "digital divide" between people who do and don't have Internet access at home. But is mobile Internet enough for a family with a kid in school?

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.