Video: States battle on budgets, federal crisis looms

  1. Transcript of: States battle on budgets, federal crisis looms

    SAVANNAH GUTHRIE, co-host: Budget battles are raging in states across the country and on Capitol Hill , where the government is facing a looming deadline that could lead to the first shutdown in 15 years. NBC 's Kelly O'Donnell is on Capitol Hill this morning with the latest. Kelly , good morning.

    KELLY O'DONNELL reporting: Hi there, Savannah . Well, after so many days of protests in Wisconsin and so few days left here in DC to try to avoid a federal budget crisis, the real political question this morning is which side will blink first? The pressure ratcheted up in Madison , Wisconsin , over the weekend. Protesters backing union workers vented anger aimed at the state's new Republican governor. Governor Scott Walker went on national television to defend his effort to drop some collective bargaining rights and get unionized state and local workers to pay more for health care and pensions.

    Governor SCOTT WALKER (Republican, Wisconsin): And I think right now frugality's in, people expect us to make tough decisions to make sure we don't pass the buck onto our kids and our grandkids. And that's exactly what we're doing here in Wisconsin .

    O'DONNELL: And here in Washington , where buck-passing got its name, some Democrats are predicting a government shutdown when current funding runs out March 4th .

    Senator DICK DURBIN (Democrat, Illinois): If we end up shutting down the government and calling into question whether we're going to meet our obligations for Social Security checks and paying our troops, then that is an absolute, utter failure.

    O'DONNELL: Democrats claim Republicans are too stubborn and their budget cuts too severe.

    Senator CHUCK SCHUMER (Democrat, New York): Speaker Boehner has said even before negotiations that he wants it a certain way. That is reckless. That's what Newt Gingrich did in 1995 .

    O'DONNELL: The '90s government shutdown , with empty offices and closed national parks , left the Republican majority then with real political damage; a cautionary tale today.

    Senator TOM COBURN (Republican, Oklahoma): It's good for political rhetoric to talk about a government shutdown , but I don't know anybody that wants that to happen.

    O'DONNELL: The Republican -led House working around the clock till 5 AM Saturday...

    Unidentified Woman: The bill is passed.

    O'DONNELL: ...did pass a budget extension, with $61 billion in cuts for the current year to keep the government operating. But because the Senate won't agree to such deep cuts , House Budget Committee Chairman Paul Ryan expects another round of talks.

    Representative PAUL RYAN (Republican, Wisconsin): We are not going to accept these extremely high levels of spending. We're not looking for a government shutdown . And I think we'll have some negotiations with short-term extensions with spending cuts in the interim is my guess.

    O'DONNELL: And the challenge is members of Congress are back in their home districts and states all week. Behind the scenes here Senate staffers are poring over what the House passed over the weekend looking for any areas of compromise they might find. But when everybody comes back to town, there will only be five days before that deadlines to reach some sort of an agreement. And we know in Capitol Hill terms, that's just not much time at all.

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updated 2/23/2011 2:19:45 PM ET 2011-02-23T19:19:45

Few memories haunt Republicans more deeply than the 1995-96 partial shutdown of the federal government, which helped President Bill Clinton reverse his falling fortunes and recast House Republicans as stubborn partisans, not savvy insurgents.

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Now, as Congress careens toward a budget impasse, government insiders wonder if another shutdown is imminent — and whether Republicans again would suffer the most blame.

Leaders of both parties say they are determined to avoid a shutdown. But they have not yielded on the amount of spending cuts they will demand or accept. Meanwhile, shutdown talk is rippling through Washington and beyond.

As shutdown threat looms, Reid digs in

"It's good for political rhetoric to talk about a government shutdown. But I don't know anybody that wants that to happen," Republican Sen. Tom Coburn said on "Fox News Sunday."

Behind the scenes, Senate officials are spending Congress' President's Day recess week pouring over the spending proposal passed by the House early Saturday, according to one Democratic leader.

"We are prepared to negotiate right away," Democratic Sen. Chuck Schumer said on CNN's "State of the Union."

The Obama administration is warning that workers who handle Social Security benefits might be furloughed. Almost hourly, top Democrats and Republicans accuse each other of pushing the government to the brink by being inflexible.

Video: Senate Democrats refuse to pass GOP bill

"So much is at stake if this great government shuts down," said House Democratic leader Nancy Pelosi. "I would hope that instead of having ultimatums, we go forward with an approach that talks about how we keep government open."

The House Republican campaign committee said Democrats are "shouting for a shutdown."

For all the political drama and rhetoric, the actual stakes of a shutdown are not so dire for ordinary Americans. The military would stay active, interstate highways would remain open and government checks would be issued, although new applicants for benefits under programs such as Social Security might have their sign-ups delayed.

In fact, the federal government has had more than a dozen "shutdowns" since 1981. Some lasted only hours, and few are remembered.

Story: House passes bill to cut $60 billion in spending

The exception is the two-stage partial shutdown of 1995 and 1996. Then, as now, a Democratic president clashed over spending priorities with a recently installed Republican House majority. Then, as now, Congress had failed to fund the government for a full fiscal year, so agencies depended on a series of "continuing resolutions" to keep them in businesses while lawmakers feuded.

When Clinton in late 1995 vetoed a Republican-crafted spending bill — he called it insufficient for health care, education and other programs — parts of the government closed for six days.

After a brief truce, the parties clashed again. Hundreds of thousands of "non-essential" federal workers were furloughed for three weeks, from mid-December to early January. (Some workers eventually received back pay for missed days). National parks, museums, passport offices and other agencies closed.

Each party blamed the other. But public opinion soon swung toward Clinton and the Democrats. House Speaker Newt Gingrich didn't help himself by suggesting he had triggered the shutdown out of pique because Clinton had made him ride in the back of Air Force One. Friends called it the biggest mistake of Gingrich's career.

Republican lore portrays the 1995-96 shutdown as a political disaster. Lawmakers who lived through it have vowed: Never again.

"There's absolutely no way" House Republicans will allow a shutdown, said Rep. Jerry Lewis of California, first elected in 1978. "It was a big mistake when Newt did it."

"There's not going to be one!" echoed Rep. Pete Sessions of Texas, who heads the House Republicans' campaign committee.

Some political insiders are not convinced that a new shutdown would play out like the last one, or that Republicans would take nearly all the blame. Public alarm over the federal debt has grown dramatically in the past decade and a half. And Republicans regained control of the House last fall largely because of candidates backed by the conservative, limited government tea party movement who ran on promises to slash spending.

The latest congressional showdown centers on spending for the current fiscal year, which is one-third over. House Republicans have promised to cut $60 billion from "discretionary non-security" programs. Those programs comprise only 12 per cent of the entire budget, and they exclude items such as the military, Social Security and Medicare, the government program that provides health care coverage for the elderly.

President Barack Obama and congressional Democrats say such cuts would be reckless and damaging at a time when the economic recovery remains fragile. They want to freeze discretionary, non-security spending at current levels for five years. That would slow or halt the typical annual climb, but Republicans say it's not enough.

Both parties say they have given as much ground as possible. If something doesn't change before March 4, when the current funding measure expires, a partial government shutdown could be unavoidable.

The big guessing game in Washington is: Who will blink first? In corridors and offices, they game out possible scenarios.

The Democratic-controlled Senate, which has begun a week-long recess, won't have time before the March 4 deadline to take up the $60 billion cost-cutting bill the House just completed.

In early March, senators will devise a short-term spending proposal likely to reflect the Democrats' demands to hold spending at current levels. Republican senators could use procedural maneuvers to block a vote on the Democrats' proposal, which probably would trigger a government shutdown.

In the event of a shutdown, some Republican strategists say deficit-weary Americans would blame Democrats for refusing deeper cuts. Democrats say voters would view Republicans as unreasonable obstructionists, as they did 15 years ago. Neither group, however, seems fully confident, and no one knows how much the political ground has shifted since Obama's election.

If Senate Republicans let a Democratic-crafted temporary spending bill reach the House, then a big decision will confront Speaker John Boehner and his sometimes unpredictable Republican caucus, particularly its dozens of tea party-backed newcomers.

Senate Majority Leader Harry Reid pounced Thursday when Boehner said Congress must cut spending beyond the levels Democrats have embraced.

"We're terribly disappointed Speaker Boehner can't control the votes in his conference," Reid said. "They're going to shut down the government."

Boehner repeatedly has said he does not want a government shutdown.

"The only people in this town rooting for a government shutdown are Nancy Pelosi and Harry Reid," he said Friday, speaking with reporters a few feet away from a crowded House floor. "There's not one Republican talking about a government shutdown. Our goal is to cut spending."

But it's not clear Boehner can bend his colleagues to his will.

In September 2008, when Republicans controlled the White House and Democrats ran the House, Boehner implored his fellow Republicans to back a $700 billion bailout of the deeply troubled financial system. Two-thirds of them refused, the measure failed, and blue chip stocks immediately lost 7 per cent of their value.

Boehner's current Republican caucus is more focused on cutting spending than was the 2008 group.

Many Democratic and Republican lawmakers say it's almost inevitable, and essential, that Obama step in to avert a shutdown. Only a president, they say, has the stature, clout and public megaphone to craft a compromise when congressional partisans seem dug in. And for now, they seem deeply dug in.

At his news conference last week, Obama chastised both parties for even talking about a shutdown.

Federal spending must be tamed, the president said, but "let's use a scalpel. Let's not use a machete. And if we do that, there should be no reason at all for a government shutdown."

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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