The U.S. in the Financial Crisis

The budget has been drained; in fact, state workers ought to have been sent home. In the U.S., an ideological dispute is delaying the urgently needed supplementary budget.

The U.S. has only just escaped the oath of disclosure. Friday was very nearly the last working day for hundreds of thousands of government employees – they would not be allowed to return to work on Monday. The financial year, which runs from Oct. 1 to Sept. 30 in America, may be halfway through already, but the budget approved by Congress has already been used up. Tax revenues turned out to be lower than expected because of the economic crisis and higher than expected expenditures. A supplementary budget is necessary.

It is not just about the lack of money, it is about an ideological dispute. The lack of money is being much more severely distributed than could be imagined in Germany. Both Republicans and Democrats are threatening each other simultaneously with a government shutdown in the hope that citizens will blame the other side.

Financial difficulties are even greater in the individual states. New Republican governors in Wisconsin and Ohio are holding the state workers’ trade unions responsible for this. High non-wage labor costs for ample pensions and above-average health insurance for state workers have bled the budget dry. Republicans want to reduce these contributions and restrict the trade unions’ negotiating rights so that there will not be a repeat of the dynamics in the next round of collective bargaining. In Wisconsin, 14 Democrats have been boycotting the state Senate for two weeks in order to make it inoperative and to prevent it from passing the anti-union bill. The governor has ordered the police to search for them.

On a federal level, Republicans and Democrats have agreed on a reprieve. They are appropriating funds for current business for an additional two weeks. Mar. 18 is now the last working day for the majority of state workers. Museums, national parks, research institutions and many other offices will be forced to close if the two parties cannot agree on a supplementary budget effective immediately and lasting until the end of September. Benefit checks for war veterans and basic state pensions would no longer be distributed. The only governmental offices allowed to continue to work would be those responsible for national security and public order, or offices which are currently indispensable, such as the Arabian Department of the Department of Defense.

It has been said that there is a considerable amount of public anger. Since no party can be quite sure whom to criticize, they are avoiding confrontation. The Republicans, above all, have unpleasant memories of this. In 1994, Bill Clinton lost his first midterm election, just like Barack Obama did recently. The Republicans wanted to drive Clinton into a corner with an austerity program aimed at reducing governmental activities. In 1995, they forced a government shutdown. Even citizens who sympathized with the Republicans turned their backs on them. In 1996, Clinton was re-elected.

However, the situation in 2011 is not exactly the same. The financial difficulties are more dramatic: The approved budget amounts to $3.83 trillion, a third of which was approved as deficit, which already stands at $1.48 trillion. The Republicans promised voters to save $100 billion when approving the supplementary budget. With their new majority in the House of Representatives, they have passed a law to cut $61 billion in plans that they have long disliked: money for family planning together with abortion counseling, the environmental protection authorities, promoting education in the poorer classes and start-up financing for health care reform.

The Democrats accept that America has to save, but they are in favor of fewer cuts so that gentle economic recovery will not be hindered. They also want to distribute the burden more equally. So far, there is only consensus from both parties for savings of $10 billion. In May, the U.S. will reach the legal maximum deficit limit, which is currently set at $14.3 trillion – equal to the whole GDP for one year.