It is just one skirmish in the great reckoning of our age. The United States can maintain the retiree health benefits, costly wars, public pensions and social welfare programs promised to a generation of citizens. Or it can maintain the low taxes to which Americans have become accustomed. But it will be nearly impossible to maintain both.
Something has to give, and figuring out what that something is will be the crux of many of the great political battles happening around the world.
This week, thousands took to the streets in Greece to protest a plan to slash government services and public pensions and to raise taxes. The plan was passed by Parliament as a condition for the latest round of bailout funds. The riots that followed sent dozens to hospitals as a fog of tear gas hung over parts of Athens.
In Britain, 75,000 teachers and civil servants went on strike last week, protesting changes that could require them to contribute more to their pensions.
And in Washington, the Treasury Department confirmed Friday that the United States will hit its legal debt limit. The Obama administration and congressional Republicans remain engaged in a high-stakes standoff over what conditions will be attached to raising it. If they fail to reach agreement, the nation could default on its debt.
In the best of times, lawmaking can be as ugly as sausagemaking, according to the cliche. It is, therefore, unsurprising that reaching a new agreement on how to revise the social contract would require all the theatrics, street protests and brinksmanship evident in capitals around the world.
The challenge for policymakers against that backdrop is to reach agreement on that core question of how taxes and spending will be changed without causing too much collateral damage in the process.
In the standoff over raising the U.S. debt ceiling, the risk is that delays could cause global investors to lose faith in the government’s ability to honor its debts, potentially causing interest rates to spike and sparking a new financial crisis.
The details of the Minnesota government’s shutdown show what can go wrong when no agreement can be reached. Last week, a judge ruled that only core government functions — public safety, welfare programs, care for residents in state facilities such as prisons, preservation of the government financial system and necessary administration functions — would continue if the government were shuttered.
When lawmakers failed to fend off the shutdown, about 20,000 state workers were officially laid off.
Hundreds of them held a vigil at the steps of the state capitol Thursday night and chanted, “We want to work for Minnesota!” and “Tax the rich!”
“The hardest part is the total uncertainty of how long it’s going to last,” said Lynn McElin, who was laid off as a contract worker at the Department of Administration. “I’m proceeding like I’m out of work and I need a new job.”
Gov. Mark Dayton (D) and the GOP-led legislature have been in a stalemate since the beginning of the legislative session over how to close a projected $5 billion budget deficit.
In an echo of the national budget fight, Dayton wanted to raise taxes on the wealthiest 2 percent of Minnesotans. Republicans wanted to close the gap with spending cuts and accounting shifts.
“I cannot accept a Minnesota where people with disabilities lose part of the time they are cared for by personal-care attendants so that millionaires don’t have to pay $1 more in taxes,” Dayton said at 10 p.m. Thursday when it became clear that a deal would not be reached.
Republicans called on the governor to convene a special session so that a stopgap measure could be passed and a shutdown avoided. He refused.
“We have been working tirelessly to meet Gov. Dayton’s funding requests that, in many cases, we matched 100 percent of the way,” state Senate President Amy Koch (R) said in a statement Thursday night. “Unfortunately, Gov. Dayton has chosen to prioritize his rigid, tax-and-spend ideology, rather than prioritize the best interests of Minnesotans as we move into the holiday weekend.”
Negotiators came close to an agreement, with Democrats proposing $35.8 billion in spending over the next two years and Republicans asking for $34 billion. But the budget for health and human services, which constitutes about a third of state spending, proved a sticking point.
Republicans offered a deal that included layoffs of some state workers and teachers along with some unrelated measures they have been unable to pass, including a voter ID law and abortion restrictions.
State parks will not open on what is normally the busy July 4 weekend, and the state’s Department of Natural Resources has estimated tourism losses of $12 million for each week the government is closed.
“It’s awful,” said Lori Peterson, a visitor from Illinois. Her family is headed to Minnesota for an annual fishing trip without the necessary — and now unobtainable — fishing licenses. “We’re talking about going to Canada next year.”