The big surprise in the Congressional Budget Office mid-year budget estimates released today isn’t that the year-to-year deficit shrank again. Or that the long-term liabilities in Medicare and Social Security continue to impend. The surprise is that federal spending will only grow about 3% in the current fiscal year that ends this October. That’s a big improvement over the annual average 7% growth we’ve seen since the first day of the George W. Bush presidency. How did that happen? Those familiar with my previous research will probably not be surprised to hear that the new political reality – divided government – has something to do with it... Earlier this year, the new Democratic Congress decided to put the federal budget on auto-pilot until October. Instead of passing new appropriations bills to fund the government for the entire year, they passed what is called a “continuing resolution” to keep the government operating. This didn’t happen because the Democrats were all that interested in spending less money. They just wanted to get the old budget work left to them by the outgoing Republican Congress off the table so they could get on with more ideological-base-friendly legislation, like the minimum wage increase. And the Democrats knew that the president might finally start vetoing legislation, too. A protracted battle over the budget wasn’t something they wanted to spend their energy on in the first half of the year. Thus, the auto-pilot continuing resolution: a piece of legislation that keeps the government running at basically the inflation-adjusted level of the previous year. With the White House veto strategy finally a credible threat, it looks like we might have a similar sort of outcome on spending this year, too. Isn’t divided government wonderful?
Assumption 1) The Divided Government hypothesis holds true to form.Looks like the abalone will have to wait. Divided Government Rules!
We will have divided government for the next two years. Minimally, we expect to see restraint in the growth of spending and some evidence for more fiscal discipline on the part of the federal government. If that does not happen, the foundation for advocating divided government will collapse, and we will refocus on abalone diving on the Mendocino coast.
Reminder - We are one week away from the next edition of the Carnival of Divided Government. The Carnival of Divided Government Sextus Decimus- Special Labor Day Edition, will be posted on or about September 3rd, 2007. Blog articles may be submitted for the carnival of divided government using the carnival submission form. Past posts can be found here or on our blog carnival index page.