President Biden and Speaker of the House McCarthy - Lisa Mascaro, Associated Press
Most observers were gratified that President Joe Biden and House Speaker Kevin McCarthy reached a deal to increase the debt ceiling. The debt ceiling is the maximum amount Congress sets on how much the U.S. Treasury can borrow when revenues are insufficient to pay for the things the government has already bought. If the Treasury cannot borrow the difference, then the U.S. will not be able to pay its bills. Although the act was passed in 1917 to limit President Wilson's ability to issue Liberty Bonds to pay for World War I, Republicans in the House did not use it as a political tool until Newt Gingrich recognized its potential as a weapon in 1995. Gingrich threatened to refuse to increase the debt ceiling unless Democrats agreed to budget cuts in domestic programs. President Clinton refused, and the government shut down for about 26 days. Eventually, Gingrich and the Republicans accepted Clinton's budget and increased the debt ceiling.
McCarthy obtained some budgetary reductions, but not the size and scope of what the most extreme caucus members wanted or expected. Selected provisions of the agreement involve work requirements for recipients of the Supplemental Nutrition Assistance Program; clawing back unspent COVID relief funds; limiting discretionary spending for the next two years to one percent; clawing back some of the funds that Congress had allocated for the Internal Revenue Service (IRS); and providing a special allowance for an energy-related project. The bill extends the work requirements for adults aged 50 to 54 to the requirements now existing for those aged 19 to 49. This change in work requirements offset the number who lose benefits by the addition of veterans, the homeless, and people who were children in foster care who the law had previously excluded. Also, the deal claws back from the IRS $20 billion of the $80 billion the agency received from the Inflation Reduction Act. Because Congress had intended the $80 billion to beef up IRS collection efforts, the Congressional Budget Office estimated that this provision would cost the government 2.3 billion over the next ten years unless future legislation reverses the effects of the debt ceiling agreement. Finally, the agreement suspends the debt limit for two years—during which time Congress will spare us another fight over raising the debt ceiling.
McCarthy obtained some budgetary reductions, but not the size and scope of what the most extreme caucus members wanted or expected. Selected provisions of the agreement involve work requirements for recipients of the Supplemental Nutrition Assistance Program; clawing back unspent COVID relief funds; limiting discretionary spending for the next two years to one percent; clawing back some of the funds that Congress had allocated for the Internal Revenue Service (IRS); and providing a special allowance for an energy-related project. The bill extends the work requirements for adults aged 50 to 54 to the requirements now existing for those aged 19 to 49. This change in work requirements offset the number who lose benefits by the addition of veterans, the homeless, and people who were children in foster care who the law had previously excluded. Also, the deal claws back from the IRS $20 billion of the $80 billion the agency received from the Inflation Reduction Act. Because Congress had intended the $80 billion to beef up IRS collection efforts, the Congressional Budget Office estimated that this provision would cost the government 2.3 billion over the next ten years unless future legislation reverses the effects of the debt ceiling agreement. Finally, the agreement suspends the debt limit for two years—during which time Congress will spare us another fight over raising the debt ceiling.
McCarthy and the Republicans attempted to extort budget cuts from President Biden. While Biden did give in to McCarthy and negotiate some reductions, the agreement was not as disastrous as it might have been. We avoided the economic chaos that would have resulted from their failure to reach a deal. Most independent observers doubt that the Republican refusal to raise the debt ceiling as a ploy to decrease spending was really about the budget. Republican Congressman Dan Bishop called the deal a "kneecap" of the 2024 Republican presidential nominee. These observers question Republican sincerity about budgetary concerns because the Republican 2017 tax cuts are responsible, in part, for the current explosion in fiscal shortfalls. If Republicans were genuinely interested in the budget, they could rescind their tax cuts. Instead, Republicans threatened cuts that might increase the government's red ink, such as cuts to the Internal Revenue Service (IRS). Nonetheless, Republicans persist in spreading disinformation that they are concerned about government spending.
Republican insistence on perpetuating the myth that they are concerned about aligning revenues with expenditures stems from their adherence to the so-called "two Santa Claus theory." Expounded first by Republican strategist Jude Wanniski, this theory posits that Democrats kept the reins on government since the days of Franklin Roosevelt and the New Deal because they gave things to people. Wanniski proposed that Republicans lower taxes, especially for their wealthy donors, and thus become a second Santa Claus. To offset the financial burden of lower taxes, Republicans would demand that Democrats cut the social programs directed at low-income and middle-class. Starting with Ronald Reagan, the familiar pattern of Republican presidents cutting taxes while demanding that Democratic administrations reduce the resulting deficits emerged.
The current Republicans, like previous Republicans, pretend they are concerned about government spending when they are concerned about defeating Democrats. President Ronald
After attacking President Carter's deficits in his campaign, Reagan proceeded to cut taxes and expand military spending. Reagan's policies tripled the national debt to $3 trillion and were cheered by other Republicans. President George H.W. Bush, in alliance with the Democratic Congress, raised taxes and cut taxes to reduce the deficit. Republicans vilified Bush to such an extent he became a one-term President. President Clinton, over the ferocious opposition of Republicans, implemented a successful plan to reduce the deficit. President George Bush scrapped Clinton's fiscal policies and increased federal spending while cutting taxes adding $4 trillion to the national debt. A housing crisis led to a recession worsened by insufficient funds. President Obama had to respond to the downturn by increasing the deficit. Republicans attacked these deficits, which, in part, were used to justify the rise of the ultra-conservative and racist Tea Party. Part of Trump's attack on the Obama Administration was the size of the deficit. In the way Trump usually keeps his word, he passed a massive tax cut and increased spending. Trump raised the deficit more than any President other than Abraham Lincoln and George W. Bush, who were fighting wars.
While we are grateful that Biden and McCarthy reached an agreement raising the debt ceiling, there are two important political consequences. First, this agreement may affect the 2024 presidential and congressional elections. About thirty of the most extreme MAGA Republicans in the House have admitted that they were willing for the U.S. to default to discredit the Democrats and thus help them in the 2024 elections. Because Biden avoided meeting the extreme budgetary cuts the Republicans demanded, voters may see the agreement as a victory for Biden and the Democrats. Also, the Republicans failed to obtain the severe budgetary cuts they had initially demanded. Thus, the debt ceiling agreement may be an advantage to the Democrats.
Second, the agreement may strengthen the pattern of Republicans giving tax cuts when they are in the majority and demanding extreme social program cuts when Democrats are in the majority. The agreement illustrates the willingness of Republicans to extort and the readiness of Democrats to yield to their demands. Because Democrats will likely accede to future extortive demands of even a small number of Republicans, the U.S. may be unable to govern itself.
Even if neither of these two possible consequences occurs, no one should believe that this agreement represents a return to politics as normal. According to Fitch Ratings, one of the three major credit agencies has announced that it is considering whether to downgrade U.S. Treasury securities.
According to Fitch's management, a review is necessary because the U.S. has increasingly shown itself incapable of governing its finances. The impact of one rating agency may not appreciably affect the credit rating of the U.S. But if other rating agencies follow a downgrade by Fitch, then MAGA Republicans may obtain the chaos they wanted despite the agreement. In either event, the possibility of a downgrade does not represent a return to normalcy.
So the agreement saves the U.S. from an immediate disaster. But we do not know if this deal is part of the continued Republican attack on our democracy.
Republican insistence on perpetuating the myth that they are concerned about aligning revenues with expenditures stems from their adherence to the so-called "two Santa Claus theory." Expounded first by Republican strategist Jude Wanniski, this theory posits that Democrats kept the reins on government since the days of Franklin Roosevelt and the New Deal because they gave things to people. Wanniski proposed that Republicans lower taxes, especially for their wealthy donors, and thus become a second Santa Claus. To offset the financial burden of lower taxes, Republicans would demand that Democrats cut the social programs directed at low-income and middle-class. Starting with Ronald Reagan, the familiar pattern of Republican presidents cutting taxes while demanding that Democratic administrations reduce the resulting deficits emerged.
The current Republicans, like previous Republicans, pretend they are concerned about government spending when they are concerned about defeating Democrats. President Ronald
After attacking President Carter's deficits in his campaign, Reagan proceeded to cut taxes and expand military spending. Reagan's policies tripled the national debt to $3 trillion and were cheered by other Republicans. President George H.W. Bush, in alliance with the Democratic Congress, raised taxes and cut taxes to reduce the deficit. Republicans vilified Bush to such an extent he became a one-term President. President Clinton, over the ferocious opposition of Republicans, implemented a successful plan to reduce the deficit. President George Bush scrapped Clinton's fiscal policies and increased federal spending while cutting taxes adding $4 trillion to the national debt. A housing crisis led to a recession worsened by insufficient funds. President Obama had to respond to the downturn by increasing the deficit. Republicans attacked these deficits, which, in part, were used to justify the rise of the ultra-conservative and racist Tea Party. Part of Trump's attack on the Obama Administration was the size of the deficit. In the way Trump usually keeps his word, he passed a massive tax cut and increased spending. Trump raised the deficit more than any President other than Abraham Lincoln and George W. Bush, who were fighting wars.
While we are grateful that Biden and McCarthy reached an agreement raising the debt ceiling, there are two important political consequences. First, this agreement may affect the 2024 presidential and congressional elections. About thirty of the most extreme MAGA Republicans in the House have admitted that they were willing for the U.S. to default to discredit the Democrats and thus help them in the 2024 elections. Because Biden avoided meeting the extreme budgetary cuts the Republicans demanded, voters may see the agreement as a victory for Biden and the Democrats. Also, the Republicans failed to obtain the severe budgetary cuts they had initially demanded. Thus, the debt ceiling agreement may be an advantage to the Democrats.
Second, the agreement may strengthen the pattern of Republicans giving tax cuts when they are in the majority and demanding extreme social program cuts when Democrats are in the majority. The agreement illustrates the willingness of Republicans to extort and the readiness of Democrats to yield to their demands. Because Democrats will likely accede to future extortive demands of even a small number of Republicans, the U.S. may be unable to govern itself.
Even if neither of these two possible consequences occurs, no one should believe that this agreement represents a return to politics as normal. According to Fitch Ratings, one of the three major credit agencies has announced that it is considering whether to downgrade U.S. Treasury securities.
According to Fitch's management, a review is necessary because the U.S. has increasingly shown itself incapable of governing its finances. The impact of one rating agency may not appreciably affect the credit rating of the U.S. But if other rating agencies follow a downgrade by Fitch, then MAGA Republicans may obtain the chaos they wanted despite the agreement. In either event, the possibility of a downgrade does not represent a return to normalcy.
So the agreement saves the U.S. from an immediate disaster. But we do not know if this deal is part of the continued Republican attack on our democracy.