Today's House Vote on PNTR with China: What does it tell us about American politics?

• PNTR stands for permanent normal trade relations

  • China pledges to open further its markets to more U.S. goods,
  • the US would end the annual congressional review of China's trading status
  • the US would facilitate China's entry into the World Trade Organization

  Who is for its passage in the House?

  • President Clinton
  • Former presidents Jimmy Carter, Gerald Ford, and George Bush
  • Republican presidential candidate, George W. Bush
  • Top Republican leaders in the House
  • Most of the business community
  • Most of the agricultural leaders

  Who is against its passage in the House?

  • The minority leader in the House, Democrat Dick Gephardt
  • Most of organized labor
  • Most human rights groups
  • Many environmental groups
  • Likely Reform Party presidential candidate, Pat Buchanan
  • Likely Green Party presidential candidate, Ralph Nader
  • About 79% of the American electorate, according to one poll

  Who is straddling the fence?

  • Vice-President and Democratic presidential candidate, Al Gore
    

• Analyze this vote in terms of
  • democratic theory
  • representative government
  • leadership, in the sense of statesmanship
  • Americans evaluation of their government

An outline of the US budgetary process

• Congressional action on the budget begins when the President submits his budget to Congress.
  • The president's budget is a huge document more than 1,500 pages long this year, and it is accompanied by a series of requests for appropriations for different government agencies.
  • According to the Budgeting and Accounting Act of 1921, the president is required to submit his budget on the 15th day of the new congressional session in January.
    
• Although the Constitution does not require that the House act first on appropriation requests, it does so by tradition.
  • Each request is assigned to one of 13 subcommittee of the House Appropriations Committee -- e.g.,
    • Agriculture, Rural Development, and Related Agencies Commerce, Justice, State and Judiciary
    • Defense, etc.
    • Each subcommittee holds hearings on its requests for appropriations.
    • Subcommittees in the House tend to cut most budget requests, on the theory that the agencies always ask for more than they need.
  • The full Appropriations committee routinely accepts the recommendations of its subcommittees.
  • The House usually accepts the report of its Appropriation Committee, although objections are often made to particular items and alterations are occasionally made if they have sufficient support.
    
• After the appropriations bills pass the House, they are sent to the Senate.
  • The bills are assigned to the Senate Appropriations Committee, which has 13 subcommittees that parallel the subcommittees of the House Appropriations Committee.
  • Agencies which felt that they were unfairly treated in the House appeal to the Senate subcommittees, which often restore particular cuts.
  • Thus, the dual consideration of agency appropriations --first in the House, then in the Senate -- historically sets up the Senate committee as a court of appeal and promotes pluralist politics in budget making.
    
• The appropriations bills passed by the House and Senate always differ in minor items and often in major amounts.
  • Differences must be resolved by representatives of both Appropriations Committees in a House-Senate conference committee.
  • Over the years, Congress has had difficulty in agreeing on its appropriations bills and in enacting all 13 bills into law before October 1, the start of the fiscal year for which the appropriations apply.
  • The federal government has regularly relied on CONTINUING APPROPRIATIONS -- resolutions passed at the start of a new fiscal year to continue spending at the same level of the previous year just to keep the government in business.
    
• The budgetary process in 1995 was very different from the process outlined above.
  
• Budgetary Gridlock: rupture of the budgetary process
  
  • First, Congress threw away the budget that President Clinton presented to the Congress last winter.
    
    • That budget contained a deficit of about $200 billion dollars, and it did not provide for a glide path to a balanced budget.
      
    • It more or less operated on an incremental budgeting approach, funding most social programs in the future about as they had been funded in the past.
      
  • Second, Congress reworked the budget and re-estimated future budgets to produce a balanced budget by 2002 (see CQ, December 16, 1995, p. 3792).
    
    • Over the 1996-2002 period, Congress proposed a net $750 billion cut in government cost.
    • Clinton, accepting the principle of a balanced budget, ultimately responded with a $385 billion cut.
    • The difference between them, according to the CBO, was $365, and it could not be bridged.
  • By November,1995, Clinton had signed only 6 of the 13 different spending bills, which meant that for many agencies, they had no money to spend.
  • This led to the fabled government shutdowns (CQ, December 23, 1995: 3876)
    • Shutdown I occurred for six days, November 14-19.
    • A seven-day Shutdown II (longest ever) occurred December 16-22.
      
• By the time that Clinton was scheduled to deliver his FY 1997 budget, the government had not agreed on a 1996 budget.
  • Both sides suffered in public opinion, but the Republicans suffered more than the Democrats.
  • Nevertheless, it could be argued that the Republicans lost the battle but won the war, for Clinton's 1997 budget did propose to balance the budget by 2002--which was the Republican position after all.
  • The disastrous 1995 experience gave Republicans incentive to cooperate with the President in the budgetary processing
  • The result was the deal that produced a balanced budget.
  • For fiscal 1998 and 1999, the government has enjoyed a surplus of over $40 billion.
  • The intractable budget problem has proved tractable

   

A little budgetary history

• In the early 1990s: (transparency)
  • There were deficits ahead as far as the eye could see.
  • Despairing of cutting the deficits, Congress passed the ill-considered Gramm Rudman deficit reduction act.
  • When that failed, Congress tried two schemes to change the government to reduce the defict:
    • A balanced budget amendment
    • The line-item veto was defended in this context.
  • No one wanted to raise taxes and cut spending to do it.
    • Bush broke his 1988 pledge of "no new taxes" and raised them in 1990, producing a revolt within his party and perhaps leading to his defeat.
    • Clinton raised taxes in 1993, but only by the barest of margins in both the House and the Senate.
• The great problem in controlling spending lies in the uncontrollables, which account for 67% of the budget: (transparency)
  • Interest on the federal debt.
  • Social security, medicare, and other mandatory expenditures.
    

Explaining Taxing and Spending Policies

• Are taxes too high in America--how would you answer that question?
  
  • Compared with what?--against time? (graph see Fig. 18.6
    
  • Compared with what?--against other countries? (graph see CWW 18.1
    
• Tax policy has three purposes: to meet budgetary outlays, to make the tax burden more equitable, or to control the economy.
  
  • The tax reform bill passed in 1986 represented one of the more sweeping changes in tax history.
    
  • Public opinion studies show that in 1984 only a small minority of the American public considered the federal income tax system a major economic problem.
    
  • The tax burden has increased over time in the United States but is still low compared to the tax rate of major industrialized democratic nations.
    
  • But in seeking electoral advantage, politicians have led Americans to believe that taxes are too high.
    
• How have government spending and tax policies affected economic inequality in America?
  
  • TRANSFER PAYMENTS - government payments to individuals - reduced income inequality until 1980.
    
  • While the tax burden of the federal income tax is now somewhat progressive, the burden of state, local and social security taxes is highly regressive.
    
  • The tax code contained many policies which only favor the rich, such as lower tax rates on "capital gains," no withholding on unearned income and no federal tax for certain securities.
    
  • Despite billions of dollars in social spending from 1966 to 1988, the gap in income between rich and poor remains practically unchanged.
• 196619801995
  Lowest 20% 4.3% 4.1% 4.4%
  Highest 20% 45.7 48.9 46.5
  
  
  • Moreover, studies recently released show that the 1% of the nation with the highest income gained most of the after-tax family income during the late 1970s and the 1980s.
    
  • In 1989, the richest 1% of families held 37% of the total net worth in the US; the next richest held 31%; and the remaining 90% held 32%. (New York Times 4/21/92, p. 1)
    
• The highly unequal distribution of wealth in American society can be understood from the perspective of two models of democracy.
  
  • Scholars argue that tax and spending policies are dominated by pluralist politics which favor well funded and well organized interest groups.
    

Public opinion studies show that Americans are unlikely to seek redistribution of income through the tax system as prescribed by the majoritarian principles of democracy.