Calm before the storm

The averted US shutdown has become the prelude for a much greater battle due for September, writes Quinton O’ReillyAn hour before midnight April 8th, the Republican House Speaker, John Boehner, presented himself before the numerous journalists gathered in Congress. Boehner confirmed that both the Democrats and Republican agreed to $39bn (€27bn) in cuts until the end of the fiscal year in September and that a government shutdown would not occur the next day. A crisis that had bubbled up over the days preceding this announcement was averted and the country could focus their attention back on stabilising the economy.The crisis had originated from Obama’s stimulus package to help bailout banks and stimulate the economy. Having upset many conservative voters with this approach, many Republicans were elected into the House of Representatives through the support of the Tea Party back in November promising to cut the federal deficit of $14bn.Having won on the back of these promises, the new influx of Republican politicians had pressurised Boehner to challenge the democrats to implement further cuts. Obama had originally promised to cut $33bn but Republicans wanted another $7bn cut alongside this.But while negotiations were successful and a shutdown was avoided, at best it will only be a short-term reprise for both sides. The next discussion concerning the upcoming fiscal year will take place in September, making the Republicans announcement of their spending plan for the next decade look more like a statement of intent. Their budget proposes to cut the deferral deficit by $5.8 trillion within the next decade, in comparison to Obama’s proposed cuts of $1 trillion over the same period.While it’s unlikely that this plan will be implemented when Obama and the Democrats are in control of both the White House and Senate, it does raise questions as to how future negotiations would progress and what way they’ll turn out.The trump card for the Republicans is their control of the US House of Representatives. With this, any federal legislation that could be proposed by the Democrats could easily be shot down or in the case of the proposed cuts, be held to negotiation.While it’s suspected that one of the areas targeted by the Republicans was military spending, which skyrocketed from $366.3bn in 2001 to $847.2 in 2010, it’s unclear what other areas will be affected until these cuts are revealed to the public.However, the Republicans may be unwilling to force a shutdown in the future, considering not only the condition of America’s economy but the frustration felt by Americans with the negotiations.While negotiations were underway, both Obama and Boehner held press conferences with the sole intention of shifting blame away from themselves. Both sides could have been blamed for the shutdown had it occurred, either for causing it or being unable to prevent it.A number of polls conducted during the negotiations had shown that Americans were split between who they felt was to blame for the crisis. While some Republicans may want to push forward and implement more cuts, they do so while running the risk of upsetting the very people they’re fighting for.Another potential problem would be the cost had a shutdown occurred. The last one occurred in 1995 during Bill Clinton’s reign and the economy lost $1.4bn over a period of three weeks. Considering how inflation has risen dramatically since then, a shutdown would have been almost catastrophic for the nation and would have weakened its economic position greatly.If such a shutdown did occur, it would have dealt a significant blow and sent ripples through a slowly recovering economy. Among other areas, hundreds of federal agencies would have shut down and around 800,000 staff members out of 2.8 million would have faced suspension without pay as a result.Allowing the economy to suffer even greater losses wasn’t an option if the country was to maintain whatever influences its fragile economy possesses. The Democrats agreeing to most of the Republicans’ demands was the only way to overcome this problem, a difficult decision considering their difference in ideologies.When September looms and the next budget is up for review, the cuts that will be introduced will do much more than just change the figures on a balance sheet. Both parties would be best advised to tread carefully before deciding on their next course of action.