Thoughts On The Debt Deal

The Daily Escape:

Rosa rugosa, Cape Cod, MA – May 2023 photo by Don Wilding

The holiday is over, and it brought an apparent deal between Biden and McCarthy. But was negotiating with the axe of a default on the national debt hanging over the country worth it? Sure, since it pulled the country back from the fiscal cliff.

But mostly, having to do it at all was stupid, and dangerous. And now, neither Party is completely happy, because both sides had to compromise. Wrongo recommends Noah Smith’s take:

“The recent fight over the debt ceiling, however, seems…like a return to the pointless obstructionism and grandstanding that characterized politics in the 2010s. There was absolutely zero reason for the House GOP leadership to use the debt ceiling — they could have just forced a deal through the normal appropriations process. Few people actually believed that the country’s leaders would let the US default on its sovereign debt due to a random minor budget fight…”

He’s correct, the House is controlled by Republicans. And the Senate also has enough Republicans to control the country’s fiscal budgeting process. They can ensure that what’s included and what’s cut would almost certainly be what Republicans wanted in the final package.

The Atlantic’s Ron Brownstein tweeted:

“It’s really something House GOP was willing to risk tanking global economy for such a tangential set of policy goals. Their plan threatened spending on young & low-income but by excluding revenue & entitlements had small impact on overall deficits. Means wildly excessive for ends.”

Despite all of the grandstanding by both Biden and the Republicans, the compromise deal looks like this:

  • A freeze on non-defense discretionary spending in 2024 and a 1% increase in 2025.
  • A 3% increase in defense spending.
  • Expanding work requirements by four years for SNAP (food stamps) and some smaller welfare programs.
  • Resumption of student debt payments (this isn’t a change to Biden’s student debt plan).
  • Reducing IRS funding by $20 billion.
  • Clawing back some unused Covid relief money.
  • Minor changes on permitting to streamline the process of environmental review.

House Republicans had initially demanded huge cuts in spending, which would have been pretty destabilizing to essential programs. These demands may have been simply an initial negotiating tactic. But not getting them in the final agreement might also speak to Biden’s negotiating ability.

Remember that the GOP’s threat to trigger sovereign default was because they think that the level of our national debt is an existential threat. But they wanted to include tax cuts in their original proposal. That would have been nuts since the purpose of their bill was to limit the growth in federal debt.

Remember too that only about 27% of our federal spending is classified as “discretionary”. About 65% is “mandatory” spending, which means that it doesn’t go through the appropriations process. (The remainder is interest on the debt.)

The spending restraint in this deal will affect only the “discretionary” portion, leaving the “mandatory” majority untouched. The “mandatory” portion includes Medicare, Medicaid, Social Security, EITC and SNAP.

More from Noah Smith:

“…what frustrates me about this nothingburger of a result is how incredibly costly it was to produce. The House GOP went through months of dramatic, high-stakes negotiations, forced the administration to consider the Fourteenth Amendment and the trillion dollar coin, got the media talking seriously about the prospect of a US sovereign default…. and all that for a little bit of discretionary spending restraint, a few added work requirements for food stamps, and a little defunding of the IRS?….It’s like…a guy walked into a restaurant with a ticking bomb demanding to blow everyone up if he didn’t get a free peppermint!”

We’re unsure if this compromise will actually pass both Houses of Congress. But if it does, it’s another piece of evidence that Republican politics is largely theater/spectacle. That’s why a reality TV star/performance artist like Trump was able to take over the Party.

OTOH, consider this quote from one of our founding fathers:

“Politics…Has Always Been the Systematic Organization of Hatreds” ̶  Henry Adams

Of course, Adams’ comment raises the question of whether politics has to be a systematic organization of hatreds, or if people could be politically active and committed, while in no way giving in to hatred of their opponents? Sounds utopian to Wrongo.

We have to give credit when credit is due. Politics is supposed to be about compromise. And Biden has accomplished a compromise in one of the most partisan, polarized times in our recent political history. If you’re arguing against what Biden did, remember that unless your Party controls every arm of the government, and in particular the Senate with a big majority, you either compromise or you get nothing done.

Want to get your way every time? Win more elections.