Sunday, September 22, 2013

Thanks to Ezra Klein

Allow me to salute Ezra Klein for correcting a mistake I made about government shutdown.  I assumed that a shutdown would mean everything stops and no government spending takes place at all.  I was wrong.  In fact, a government shutdown only shuts down the discretionary portions of the government.  Mandatory spending on autopilot.  Autopilot is not a very satisfactory substitute for a live pilot, since someone has to send out the Social Security checks that are automatically issued, and so forth, and personnel are part of discretionary spending.  Most of Obamacare is mandatory and therefore will continue, even if the federal government shuts down.

Klein does not follow up on what this would mean if shutdown and debt ceiling breach occur at the same time.  I really could use some guidance on the subject because looking up the federal budget, I got this:

It may not be easy to follow in all things, but add up Medicare and Medicaid (mandatory) as 23%, Social Security (mandatory) as 22%, other mandatory as 13% and interest on the national debt (not stopped during shutdown) as 6%, it comes to 64%.  By contrast, defense at 19% and other discretionary at 17% come to a total of 36%.  If we are borrowing about a third of the total budget (down from 40% during the last crisis), then it sounds as though so long as government remains shut down, we will not have to borrow to fund it, and the debt ceiling will not be breached.  Of course, once the federal government reopens, there will be a sudden spurt in spending that will cause a breach, which means that any deal to keep the government going will presumably have to deal with the debt ceiling.  But I would think it would also mean that as long as the discretionary portion of the government is shut down, raising the debt ceiling will lose its urgency.

This one puts discretionary spending at 31% of the budget, or enough to require just a little borrowing, so that during a shutdown, we will continue to creep up on the debt ceiling, but much more slowly.  Either way, though, so far as I can tell, effectively so long as there is a shutdown, there will be no breach, but any deal to end a shutdown will have to raise the debt ceiling to avoid a breach.

But then, my logic on a shutdown was mistaken, perhaps my logic on this one is flawed as well.  Anyone?

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