Washington's Fiscal Impasse: GOP and Democrats Dig In Amid Shutdown Threat

Strategic Insights -

The Washington fiscal impasse remains unresolved as the deadline for a new federal budget approaches, with Senate Democratic leader Tom Daschle and Senate GOP leader Bob Dole engaged in a heated exchange. Daschle blamed Republicans for stalling talks, while Dole expressed opposition to another shutdown. White House chief of staff Leon Panetta countered that a shutdown would not give Republicans leverage and would instead harm federal employees and the economy.

Key Takeaways:

  • The $245 billion tax cut proposed by the GOP is a critical point of contention, with Daschle stating it is "not going anywhere" and will not be approved unless the price is marked down.
  • The Clinton administration has offered a 10-year plan to end budget deficits with a lower tax break and smaller cuts in Medicare, Medicaid, and other programs.
  • Republicans have insisted that Clinton offer an alternative to their plan to slash spending by $1 trillion, provide $245 billion in tax cuts, and balance the budget by 2002.
  • A survey of 8,000 major corporations in the United States and Canada, conducted by the Financial Executives Institute, showed that 77% of business executives believe a failure to agree on a balanced-budget plan would hurt the economy.
  • The survey also found that 68% forecast higher interest rates, 56% predicted a decline in sales, 40% expected some job loss, and 50% predicted drops in stock prices.
  • Senate Finance Chairman William Roth, R-Del., stated that budget negotiations were like the "sound of one hand clapping" because the Clinton administration had not put forth a balanced budget proposal.
  • Boehner expressed optimism that negotiations would reach an agreement by mid-December, but added that if the Clinton administration refused to cooperate, Republicans would have "no choice but to not send any more money down there."

Statistics:

  • 77% of business executives believe a failure to agree on a balanced-budget plan would hurt the economy (Financial Executives Institute survey).
  • 68% of business executives forecast higher interest rates (Financial Executives Institute survey).
  • 56% of business executives predicted a decline in sales (Financial Executives Institute survey).
  • 40% of business executives expected some job loss (Financial Executives Institute survey).
  • 50% of business executives predicted drops in stock prices (Financial Executives Institute survey).
  • 800,000 federal workers were idled during the previous six-day shutdown.
  • 14,000 executives from 8,000 major corporations in the United States and Canada participated in the Financial Executives Institute survey.

Sources:

  • JUSTIN J. SUPON, "GOP must move on tax cut or budget plan 'isn't going anywhere'," Washington, Dec. 4
  • The Financial Executives Institute, "Survey of Business Executives on Budget and Economy" (Nov. 29 - Dec. 4)