The stage is set for the real fight over spending. It’ll make the shutdown spat look tame. By Art Pine, Contributing Editor April 12, 2011 Expect the budget battle to intensify now that Washington has gotten past last weekend’s threat of a government shutdown.As expected, the shutdown talk was mainly theatrics. The more lasting impact is that the GOP budget-cutting plan outlined by House Budget Chairman Paul Ryan (R-WI) has drawn stark battle lines for what will almost certainly spawn a bitter 2012 campaign based on class warfare. As always, Democrats will defend traditional entitlement programs, such as Medicare and Social Security, which are designed primarily to help the poor and elderly. And Republicans will seek to reduce the size of government, cut spending on social programs and reduce taxes for corporations and for the rich. This time, the fray will be more intense, because the staggering budget deficit has shifted public sentiment. Americans are more receptive than they’ve been in years to paring spending and reducing the deficit, though they haven’t shown they’re ready to support the kind of overhaul Ryan is talking about. Advertisement Both parties have laid down markers that will make it more difficult to come to an agreement. Partly because of the wars in Iraq and Afghanistan, neither side wants to slash defense spending markedly. Democrats don’t want to cut Medicare and Social Security. And the government can’t renege on paying interest on the national debt. That puts almost 80% of federal spending off limits -- too much to permit real change. Using tax increases to help narrow the deficit also seems unlikely. Republicans want to cut the tax rate for corporations and high-income taxpayers. And Obama has shied away from raising rates on anyone earning up to $250,000 a year, well above traditional definitions of “middle class.” Both parties backed White House legislation to temporarily trim the payroll tax, and they’ll be under heavy pressure to extend the cut when it expires. Since the payroll tax is a major source of funding for Social Security benefits, continuing the tax holiday would significantly worsen that program’s financing problem. Advertisement Republicans and Democrats have each made a series of budgetary mistakes. To stem the recession and spur the economy, President Obama relied partly on spending for “shovel-ready” projects, along with financing for high-speed rail and wind turbines. None of those had much impact. Meanwhile, the cost of jobless benefits soared. Both Obama and his predecessor, President George W. Bush, let government spending on health care rise sharply, worsening the future budget picture. Bush pushed through an expensive prescription drug plan, while Obama backed a sweeping health care overhaul measure. Last December, two bipartisan panels came up with detailed plans for closing the budget gap, but both the White House and Congress ignored them. Obama proposed his own, admittedly inadequate plan. Ryan’s proposal contains elements of both proposals, but also is flawed. One big unknown: how voters will react. Advertisement Polls show Americans are uneasy about the budget situation and want to reduce the government’s debt. But there’s no indication the electorate is ready to accept Ryan’s proposals on converting Medicare into a voucher program designed to help seniors buy private medical insurance. “These proposals have huge consequences for the income distribution of the country,” says Barry Bosworth, an economist at the Brookings Institution, a Washington think tank. The two sides “are into a debate where there are genuine consequences.” The resulting political vacuum all but invites partisans in both parties to seize on traditional class warfare rhetoric between now and the 2012 presidential election. Only this time, it won’t be just rich vs. poor. It’ll be seniors against younger voters, whites against minorities. Odds are that not much will happen until after the election, and that the budget outlook will further deteriorate. Depending on the election outcome, one party may have the clout to get its way on a plan to reduce the deficit. Eventually, of course, the situation will force lawmakers to act. But the longer it’s put off, the more painful it will be.