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A worthwhile pause

Rochester Business Journal
August 3, 2012

From one perspective, the stopgap federal spending pact announced this week might be dismissed as Congress once again kicking the can down the road. But pragmatism sometimes isn't such a bad thing.
 
The agreement outlined by Democratic Senate Majority Leader Harry Reid and Republican House Speaker John Boehner would fund the federal government at levels spelled out a year ago in the accord Mr. Boehner and President Barack Obama reached on the budget and federal debt. That agreement calls for $1.047 trillion in annualized spending-essentially flat compared to the fiscal year that ends Sept. 30.
 
Republicans wanted to slash nearly $20 billion off the amount agreed a year ago, but apparently they decided that repetition of last summer's nail-biter-or worse, a government shutdown-would not help them at the polls in November. Better to keep voters focused on the big picture of weak economic growth and a persistent high jobless rate.
 
For his part, Mr. Reid told reporters that the continuing resolution will "provide stability" through the first quarter of 2013. Less uncertainty can't hurt.
 
Essentially, this week's agreement means that the next president and Congress will decide on spending in the next fiscal year. In the meantime, Mr. Obama and the current Congress have plenty to do-topped by dealing with the fiscal cliff that looms in December.
 
The stopgap deal also allows Washington-and voters-to take a step back to consider what level of spending makes sense. A recent post on the New York Times Economix blog provides context that might surprise many people: "Government," wrote Catherine Rampell, "has been shrinking steadily for two years, and compared to the size of the overall economy, government is actually slightly smaller today than it has been on average in the postwar era."
 
True, most of the downward trend traces to cuts at the state and local levels. Nonetheless, government spending today as a percentage of gross domestic product is lower than it was during Ronald Reagan's presidency.
 
The size of the federal government is an important topic for debate, especially during the home stretch of the presidential debate. But let's hope it happens without the usual grandstanding and fact-bending.

8/3/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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