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The US Budget showdown is fascinating for a number of reasons. As one of my friends commented, what triggered a constitutional crisis in Australia in 1975 is the ordinary course of business in the US.

What occurred was a powerplay of the most extraordinary proportions. The stakes were high. On the Left, Barack Obama feared the curse of all left-wing politicians in the modern era – to be painted as a tax and spend liberal who would raise the debt ceiling rather than slash spending. On the Right, John Boehner’s gambit would have paid off very poorly for him had he actually shut down government. Shedding $8bn off the economy each week the government shutting down, and potentially annihilating all the economic recovery since the GFC would have destroyed Boehner’s whole economic narrative for slashing spending. More importantly, financial markets had expected the Budget to be passed. Had they not, they would have plummetted and Boehner would have been blamed.

Equally fascinating, I find, is the composition of the budget. Whilst both sides were quibbling over Planned Parenthood (an abortion counselling service, partially funded by the government) and NPR (roughly equivalent to ABC radio here), the truth was that the majority of spending and thus where the majority of spending cuts should have come from was Social Security, Medicare, Medicaid and Defence.

Here is a graphic from Wikipedia:

Isn’t that staggering? Only 20% of the Budget is actually discretionary spending on most of what you think the Federal Government does. Everything you think the Federal Government does – national highways, FBI, CIA, NASA, national parks, running the Senate, Washington DC. That’s all placed in to a category marked ‘misc’.

At least 43% of Federal expenditure is on state issues – health, social security etc. 20% is spent on the Defence. And interest payments on the US’s huge debt, is 6%. That’s one third of all discretionary spending. Cutting the debt isn’t just a political buzzword, its an economic necessity in the long run.

And isn’t also funny how disconnected the ordinary American voter, and to some extent, the American media, is from the real issues? Whilst there was some focus on slashing health expenditure, the far greater focus was on incredibly minor partisan issues. I am not fond of the Republicans who pushed these partisan interests ahead of the national interest, but nor am I fond of Democrats who refused to allow cuts to the sacred cows of Medicare and Social Security.

This blog has taken a consistently strong line on health care reform in America. This is not a question of trimming budgets and cutting wasteful spending. This is a question of wholesale structural reform of the US healthcare system. I may not agree wholeheartedly with Obamacare. I may not agree wholeheartedly with Republican proposals. But the way America’s healthcare system has evolved, it is grossly inefficient and wasteful. America spends far in excess on healthcare, whilst experiencing shorter life expectancy than equivalent countries.

As one of my (conservative) friends pointed out, isn’t it funny that progressives believe the Constitution is a ‘living document’ whilst believing programs like Social Security and Medicare that were conceived of in a time with totally different demographics are set in absolute stone?

Today, the NYT ran a series of articles on how Obama might reframe his leadership as a result of the Budget (e.g. http://www.nytimes.com/2011/04/10/us/politics/10assess.html?hp and http://www.nytimes.com/2011/04/10/weekinreview/10obama.html).

I think Obama, who has always been a centrist with liberal tendencies in some narrow policy areas, will do well in the current political environment. I think if you search through this blog’s archives in 2008, you’ll find that I disapproved of Obama’s campaign just before the presidential election to redefine his entire presidency as hinged upon a vague notion of ‘Hope’. I thought he should put his credentials as a reasonable person on display because that is what excited me about Obama. He stood up to teacher’s unions, because that was the right thing to do. But equally, he stood against the Iraq War because that was the right thing to do. And that is also why he stood for ‘war’ in Libya, because that was the right thing to do. Those ideas are not inconsistent when you think of Obama, as a great progressive pragmatist who does what ought to be done.

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