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Why Not Try a Summit Instead of a Shutdown?

Enough threatening body language, vocal recriminations and political posturing over a possible government shutdown at the end of this week or later in March. They are nothing more than sideshows to the budget debate that really needs to be taking place. 

Yes, the possibility of a shutdown in 2011 is a spectacle that is way too interesting to ignore, especially given the sometimes-eerie parallels to the two that occurred in 1995 and 1996. Yes, those participating in and observing the political maneuvering are behaving as if each new development is the latest chapter in an epic battle between good and evil that somehow will determine the future of the universe. And, yes, a government shutdown has the potential to do real harm to the economy, companies and individuals. Therefore, it demands our attention.

But the real federal budget problems have little to do with the fight over appropriations that could lead to a shutdown. The debate should be about the mismatch between revenues and spending, as well as the projected spending increases in some benefit programs. That leads to three questions. First, why does anyone think that making a stand on appropriations is worth the current effort? Second, by focusing on the part of the budget that has been shrinking the most, are some people really just trying to get credit for doing something big while avoiding the real issues? Third, aren’t the time, energy and political capital needed to deal with a shutdown going to make it less likely for the real debate to occur, especially given the welts and scars that will very likely continue to be felt when this Tinkertoy of a fight eventually ends?

The two-week continuing resolution proposal floated Friday to avoid a government shutdown at the end of this week is the latest example of a fiscal trifle being mistaken for a monumental development. Most of the announced $4 billion in savings in the House GOP plan, which Senate Democrats at least initially signaled a willingness to accept, comes from cutting $2.8 billion in earmarks. But removing earmarks doesn’t actually cut spending; it only shifts the decision about how to use the funds from the legislative branch to the executive branch. Getting rid of earmarks only reduces spending if the appropriation is cut by the same amount. At the time this column was being written, it was not at all clear if that would be the case.

Even if the proposal is agreed to and the shutdown is foiled Friday, the two-week reprieve will not eliminate the problems. The deeper into fiscal 2011 we get, the harder it will be to reduce spending by anything close to the minimum cuts insisted on by the tea party wing of the House GOP. Those spending cuts will also be far more economically and politically damaging because they will be almost impossible to achieve without laying off thousands of government contractors and federal workers. Therefore, they’ll be easier to oppose by many in both political parties.

Unless the short-term CR is enacted early this week, it will also cost the taxpayers money as federal agencies begin to implement their shutdown plans just in case the deal collapses. Businesses that expect to be affected by a shutdown will also incur additional costs and see productivity suffer as they begin to implement their own shutdown contingencies. 

Most important, however, is that the two-week CR will leave even less time for the budget work that Congress and the president should really be doing: crafting a fiscal 2012 budget that includes the long-term changes that will have a significant positive impact on the deficit outlook.

My suggestion is simple: The GOP should trade the inconsequential fight it’s waging over fiscal 2011 appropriations for an agreement by the White House and Congressional Democrats to participate in a summit on addressing the federal deficit. The summit should begin on the same day that the president signs a continuing resolution for the rest of 2011. Everything the federal government does should be open for discussion.

This would work for a number of reasons. The GOP would be trading an ultimately insignificant short-term win over appropriations and the risk of a huge political loss over a shutdown for the possibility of what it says it really wants — a big change in the deficit. Republicans would also retain their ability to deal with appropriations for fiscal 2012 if the negotiations break down. Democrats and the White House would make three major gains: They wouldn’t have to worry about who would get blamed for the shutdown, they would have the whole scope and breadth of federal activities on the table, and they would be in a position to get Republicans who so far this year haven’t shown much willingness to negotiate, to do so.

Wall Street would view the focus on the long-term deficit as a positive. And the budget debate would benefit from the needed negotiations that have taken a back seat to the nation’s almost pathological preoccupation with a shutdown.

Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of “The Guide to the Federal Budget.”

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