Obama Gets a Last-Minute Congress Approval on the Budget

The “shutdown” will not occur. One hour from the set deadline of midnight Friday, April 8, 2011, Barack Obama announced live that Democrats and Republicans reached a last-minute historic agreement to make $39 billion in cuts from the initial budget by Sept. 30, 2011.

This compromise reached in the snatch will help avoid putting some 800,000 federal employees of the United States on short leave. Unlike what happened in 1995 under Bill Clinton, Barack Obama would not have to veto the adoption of a provisional budget law badly cut by driving a de facto suspension of service administration.

Until the final hour, the public sector had prepared for this threat, dictated by the Antideficiency Act in case of deficiency in legislation on the finance bill of the current fiscal year.

Level of cuts “historic”

“We have preserved the investments we need to prepare for the future,” Barack Obama said, visibly relieved and qualifying as “historic” the amount of budget cuts. Technically, a resolution was adopted on Saturday night to adopt “a stop-gap spending measure” until Thursday as part of a comprehensive and final compromise on budget cuts.

The Republicans had everything to lose if a “shutdown” were implemented. For his part, Barack Obama might see his authority seriously undermined by a fiscal crisis in which he intervened late.

The differences between Republicans and Democrats on the amount of proposed budget cuts were on less than 1 percent of the total budget for the year that ended Sept. 30, 2010 ($3.5 billion). But the Democratic majority leader of the Senate, Harry Reid, had made it clear that the blocking was largely due to “budget riders” introduced by Republicans in particular to prevent the return of abortion to the District of Columbia.

Lesson Learned

Obviously, the Speaker of the House of Representatives, John Boehner, has learned the lessons of the previous “shutdown” of 1995, which had heavily penalized the Republicans in the eyes of the public by leading to the layoffs of 800,000 federal employees for 21 days.

Despite this initial unquestionable success for Barack Obama, “the battle is just beginning,” according to most observers. Besides the upcoming debate on the 2012 budget proposed by Barack Obama and Republican Paul Ryan’s plan, which provides $4 trillion in spending cuts over 10 years, Congress will have to vote on removing the ceiling above the federal debt.

Treasury Secretary Timothy Geithner has recently warned politicians against the risk of inaction by saying that the current ceiling of federal debt ($14.3 trillion) will be reached next May 16, 2012. Without congressional vote, the Chairman of the Fed, Ben Bernanke, and Secretary Geithner have already indicated that a further delay would have “catastrophic consequences” on market confidence.

By placing himself in the role of “mediator in chief,” Barack Obama is earning a large portion of the gain from the political compromise, even if it costs large concessions to Republicans. “This is just the beginning. We will still have to do something substantial on debt to restore order to our fiscal house,” Senate Republican leader Mitch McConnell warned yesterday.