We’ve already covered Obama, now it’s Romney’s turn. What would unravel in the budget war should Romney be elected? If Romney wins, political powers will clash and a decision will be delayed until Romney can take office – expect entitlement cuts.
Fiscal Armageddon, as you’ve heard it – “The Fiscal Cliff” is set to swing in to effect January of this coming year. No matter who wins the presidency, we shouldn’t expect any long-term solutions until well into 2013. That being said, temporary stopgaps will surely take into effect and we will avoid running the car over the cliff.
We recently covered what would happen if Obama wins re-election, if you didn’t catch the article you can find it here. Here is a brief snippet:
Following the 6-months of negotiation expect to see something very similar to Obama’s independent fiscal commission, with something like a 2-to-1 cut/tax increase ratio. Expect that entitlements will be touched only moderately, taxes will increase for those who make greater than $250,000 dollars and the bush-era cuts will expire. For the Republicans? The full defense budget is restored. (This is all I can see happening for them).Even though Obama will push for quick resolution, expect a temporary 6-month or so extension to keep the budget where it is at and the government running.
How does a Romney presidency differ from a Obama one?
Certainly the Republicans will gain the upper hand come time for negotiating. They will control the House and possibly even the Senate, the trifecta of the presidency will mean a huge political victory – and all those representatives that signed the tax pledge promising to avoid tax hikes will get a boost.
The reason is simply control, the republicans will have near absolute power. First, expect it to be very difficult for Obama to try to pass through budget reform before he is out of office, he will try and he will fail. Instead, I suspect we will see very animated “shit shoveling” back and forth – and a near encounter with the cliff – probably within a couple of weeks.
The solution will be temporary, an extension will be passed and Obama will sign it. Expect that when Romney comes into office that a budget proposal is already drafted. It will quickly pass the House, and but may stall in the Senate. If it does stall, Democrats may be able to bargain to limit entitlement cuts, but don’t expect the Republicans to go that easy on them. Democrats will get some tax reform in the closing of loopholes.
A piece of good news, expect that tax rates wont increase. Certainly the defense budget will be unscathed, as even many democrats support this. We will see heavy budget cuts and the gutting of many agencies and departments. Agencies such as the EPA, who are fighting for their lives will be the first on the chopping block. Expect almost all regulatory agencies to take drastic cuts.
We may also see a call for a balanced budget bill (I dread a bill like this), and it is possible a bill such as this would pass. More likely, a limit on spending such as the ones proposed by Paul Ryan or Bill Clinton. The limit would be a limit on spending growth or a cap at what can be spent as a percentage of GDP. Either way, expect something.
A huge win for Republicans would be to orchestrate all this, getting things passed quickly and without too much commotion. After the grueling gridlocks, this would be seen as a breadth of fresh air. Republicans will gain in popularity, at least temporarily for that reason.
This truly is one of the most important elections for the Republican party in a generation. On the other side there is no silver lining for Democrats, if they get beat – they are sitting on the bench for the next 2-4 years.