Washington with Its Hand Outstretched

The U.S. government may end up with no money.

U.S. government agencies are once again on the verge of a “shutdown” due to partisan debates on Capitol Hill.

Disagreements between Republicans and Democrats have taken government funding hostage. Today, for the third time this year, the government is in danger of a so-called partial shutdown. If a trillion-dollar budget bill is not passed on Friday, then many government agencies will be left without funding.

However, this bill, along with many others that need to be passed before the New Year deadline, is being delayed by epic battles between the two major parties on taxation and expenditures. The partisan rancor is now commonplace. The presidential election is not far off, so each party must demonstrate its clout. As a consequence, reaching a compromise has proven very difficult.

One sensitive issue is the current payroll tax cut, which is set to expire at the end of this year. If it is not extended, the average American’s wallet will take a big hit. In that event, the same cuts will damage the country’s already shaky economy. President Barack Obama and his party cannot be seen letting that happen, and, as a consequence, they are doing all they can to try to persuade their opponents to preserve the payroll tax cuts.

To achieve this, the Obama administration is apparently willing to sacrifice major policy proposals, such as their desire to end the previous (George W. Bush’s) administration’s “tax holiday” for the rich. President Obama’s team has advocated abolishing such privileges from the very beginning of his term, stressing that the budget deficit has already reached dizzying heights. However, the Grand Old Party is willing to fight to the death in order to prevent tax hikes on multimillionaires.

Supposedly, there are other ways of getting the necessary funds into the treasury, such as federal spending cuts and federal workforce reductions. So yesterday, Democrats on Capitol Hill stated that Obama and his colleagues could make concessions and not pursue the ending of the millionaires’ “tax holidays.” Of course, they would only do so if their opponents agreed to support key Democratic positions.

Meanwhile, an important guest visited Republican senators. Federal Reserve Chairman Ben Bernanke met with Republican lawmakers behind closed doors. Intense interest in the conversation, however, led lawmakers to discuss the meeting afterwards with the press. Besides, the GOP clearly liked the conversation.

Republican Senator Lindsey Graham told reporters that everyone was concerned that “we’re going to somehow use taxpayer dollars to prop up a European problem.” However, according to Graham, Bernanke declared that “he doesn’t have the intention or the authority” to do so. Another Republican senator, Bob Corker, supported his colleague, specifically noting that Bernanke made it “very clear” that the Fed does not intend to bailout Europe.