Newsmax Financial Insider David Stockman
warns that America is on fiscal collision course with economic disaster.
“We’re on the fiscal Titanic and we’re going to hit something hard and immovable one of these days,” Stockman, White House budget director under President Reagan, told CNBC.
Ending weeks of infighting, the U.S. Congress on Wednesday voted to avert a government shutdown just hours before a midnight deadline, passing a stop-gap measure to extend funding for federal agencies until Dec. 11.
The House of Representatives relied heavily on Democrats to secure passage in a 277-151 vote. A large majority of Republicans voted against the measure, which did not meet conservatives' demands to cut off money to women's healthcare provider Planned Parenthood amid an abortion controversy, Reuters reported.
The funding extension aims to give congressional negotiators and Obama about 10 weeks to work out a longer-term budget deal and ease automatic spending constraints on military and domestic spending. Senate Majority Leader Mitch McConnell has said he would like to reach a deal with Democrats that sets funding levels for two fiscal years, through Sept. 30, 2017, Reuters reported.
However, a government shutdown would force Congress to address fiscal issues before they reach unmanageable levels, said Stockman, director of the Office of Management and Budget from 1981 to 1985.
Many in Congress have opposed a shutdown, as a government closure can put some federal employees temporarily out of work or delay their pay. Stockman contends it could have a positive effect by making lawmakers address spending and debt issues.
He called for entitlement and defense spending reform. He also argued that easy monetary policy from central banks has made lawmakers less likely to address the deficit.
Still, Stockman did not clearly outline why a shutdown would force lawmakers to make significant budget changes, CNBC reported.
Meanwhile, the threatened federal government shutdown cost U.S. taxpayers money without ever happening, budget experts told Reuters.
Whether or not the party's conservative Tea Party faction forces a shutdown, there are real costs to discussing and preparing for the possibility of one, they said.
Making shutdown plans during the workday diverts federal workers from other tasks that then have to be put off, which costs time and money, said Yvonne Jones, a director at the Government Accountability Office, a non-partisan congressional watchdog. Jones wrote a report on the 2013 shutdown's costs.
The Office of Management and Budget last week said "prudent management" meant federal agencies would be planning ahead for a possible Sept. 30 shutdown deadline by identifying which programs should be kept open and how to fund them.
The prolonged threat of a shutdown hurts staff morale, Jones said, further decreasing worker productivity. She said agencies have expressed concern over how much negativity the threat of a shutdown brought, even if it never happened.
Douglas Holtz-Eakin, former director of the Congressional Budget Office, called lost productivity a "hidden cost" that does not explicitly show up in the budget.
The 16-day government shutdown in 2013 cost more than $2 billion, according to an Office of Management and Budget analysis. Much of that was compensation to employees paid not to work for a combined 6.6 million days.
The shutdown also made a small dent in the economy's growth rate, the Bureau of Economic Analysis found.
© 2022 Newsmax Finance. All rights reserved.