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Budget Woes Plague Federal and State Budgets

posted on February 25, 2011


Hello, I'm Mark Pearson. The U.S. economy grew more slowly at the end of last year than originally estimated, as consumers, businesses, and even government cut spending.

In a downward revision of previous estimates, the Commerce Department reported Friday that 4th quarter gross domestic product -- the broadest measure of economic activity -- increased at an annual pace of 2.8 percent. That's down from the initial estimate of 3.2 percent.

Consumer spending, which powers much of the U.S. economy, rose at an annualized rate of 4.1 percent, slightly below the initial estimate of 4.4 percent. Still, it was the best quarterly showing since 2006.

Spending by businesses increased at an annual clip of 2.8 percent in the October-December quarter... down from the initial government estimate of 3.2 percent.

But state and local governments, wrestling with gaping budget shortfalls, cut their spending by 2.4 percent... nearly three times as aggressive as the originally estimated.

And making good on campaign promises to reduce the federal deficit, Republicans in the U.S. House of Representatives approved $61 billion dollars in spending cuts late last week. Democrats, who control the SENATE, adamantly oppose the cuts, but only have a week to hammer out a compromise to avoid the first federal government shutdown since 1996.

Both parties have sought to preemptively blame the other if a shutdown does occur. Nevertheless, it seems likely that Congressional lumberjacks are about to swing the budgetary axe.

Budget Woes Plague Federal and State Budgets

Lawmakers from the halls of Congress in Washington to the capitol dome in Madison, Wisconsin are all holding their collective breath this week. With tattered budgets at the state and federal level, many congressional leaders are searching for answers with a variety of spending cut proposals.

In Washington, Democrats and Republicans are hammering out differences over the federal budget. With current spending in the red, Republicans pushed through a quiet but controversial piece of legislation this past week. The bill includes drastically sliced domestic spending on everything from farm programs to the elimination of federal support for public broadcasting. But much of the measure was labeled dead on arrival by a host of Senate Democrats.

Republican proposed cuts to USDA include slashing $185 million from the Agricultural Research Service, $75 million from the Animal and Plant Health Inspection Service and $172.5 million from the Natural Resources Conservation Service.

President Obama released a separate $3.7 trillion budget, calling for cutbacks in farm program payments, wildfire management, and agricultural research earmarks.

If not remedied by early March, the budget dispute could lead to the first federal government shutdown since House Speaker Newt Gingrich and President Bill Clinton in the mid 90s.

Federal deficits are estimated to reach a record $1.5 trillion this coming fiscal year. Republicans won control of the House and gained Senate seats last fall on a promise of reducing spending and "reining in" government oversight and control.

As Congressional leaders scrambled for a compromise late this week, journalists and political prognosticators attempted to peg whether President Obama or Republican leadership would suffer a blowback from the floundering budget negotiations.

Many state budgets across the country are facing a similar fate as newly minted Governors strive to patch multi-billion dollar gaps between spending and revenue. In New Jersey, Republican Governor Chris Christie – a well known deficit hawk – said his philosophy of drastic spending cuts is gaining steam.

Gov. Chris Christie, R-New Jersey: "Today, they are standing up and saying, just as I did last March, the problems we have hidden for decades are evident for all to see. The day of reckoning has arrived.

In California, a new Democratic governor has proposed to cut the number and pay of all state employees. And in Wisconsin and Ohio, they have decided there can no longer be two classes of citizens, one that receives rich health and pension benefits, and all the rest, who are left to pay for them."

Governor Christie isn't the only one watching the trials and tribulations in Madison, Wisconsin this week. Wisconsin's governor, Scott Walker, has attracted national attention with legislation that would ban collective bargaining between public officials and state government and he argues – reduce costs to taxpayers. Walker, a first-term Republican, says the move is necessary to fill Wisconsin's more than $3 billion budget gap.

Gov. Scott Walker, R-Wisconsin: "The bill put forward isn't aimed at state workers and it certainly isn't a battle with Unions. If it was we would have eliminated collective bargaining completely. Or, we would have gone after the private sector unions, but we did not."


Tags: government money news