A modified and updated version of the previous
post has been published in the last number of Dollars & Sense Magazine
here. The main addition is a discussion of the 'solution' to the last crisis, and a very brief discussion of the brewing storm for early next year.
The Default Prevention Act of 2013, included in the continuing resolution, reinstated government funding at pre-shutdown levels through January 15, 2014, and authorized suspension of the debt limit through February 7, 2014, at which point we would be basically in the same situation we were in October. Under the agreement reached to end the shutdown and to avoid breaching the debt-ceiling limit, the House of Representatives and the Senate agreed to hold negotiations to reach an accord by December 13 on a plan for fiscal policy for the next ten years.
This is not very different from the previous debt-ceiling crisis in 2011, when the so-called “Super Committee” was charged with finding $1.5 trillion in savings over a ten-year period, but eventually failed to reach an agreement. That triggered, in early 2013, the infamous “sequestration,” cuts of discretionary spending totaling around $1.2 trillion over the same period. Note that, as for the Super Committee and the previous Bowles-Simpson National Commission on Fiscal Responsibility and Reform, the terms of any accord by the members of the Budget Panel led by Senator Patty Murray (D-WA) and Representative Paul Ryan (R-WI) (who were members of the Super Committee) would imply further “fiscal adjustment.” The main disagreements are that Democrats would like to see targeted spending cuts, and to increase revenue by closing tax loopholes for corporations and wealthy individuals, while Republicans would not want any tax increases, and demand cuts to entitlement spending. The attempt at bipartisanship did not go all that well last time, and chances are that it will fail again.
Note all of this is functional and is being used to maintain austerity policies in the US.
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