I guess the story most worthy of comment today is the debt ceiling. The House has passed a bill raising that debt ceiling that also reduces spending to 2022 levels and caps spending growth at 1% per year, repealing some renewable energy tax incentives and stiffening work requirements for antipoverty programs. The bill isn’t expected to pass the Senate.
As you might expect there are differences of opinion about the bill. By and large Democrats want a “no strings attached” increase of the debt limit. The editors of the Washington Post largely concur:
In an ideal world, House Republicans would do their duty and lift the debt limit without exacting a ransom. This is about paying the money that Congress — in a largely bipartisan fashion — already committed to spend. This is also about reassuring a fragile world that the U.S. government can still do something as basic as pay its bills. A potential debt-limit catastrophe is lining up to hit just as the U.S. economy flatlines. The latest report on gross domestic product on Thursday showed a slowing economy in which businesses have already cut back sharply on spending in the face of high uncertainty. On top of that, China and Russia are making a push to get other nations to sign on to alternatives to the U.S. dollar. A U.S. default would enhance their cause.
It’s true that President Biden and Congress need to discuss spending. The nation is on a fiscally unsustainable course. Social Security and Medicare costs are rapidly escalating, along with interest expenses as the debt grows. But holding the debt limit hostage to impose blunt spending cuts would only backfire. A default — or even a near-default — would lead to higher borrowing costs. That’s exactly what happened in the 2011 debt-limit standoff.
It would be best if Republicans agreed to raise the debt limit and Mr. Biden and Congress launched a separate, parallel process to negotiate how to stabilize the budget. Mr. McCarthy likes to tout that his bill would save nearly $5 trillion over the next decade. But here’s the catch: House Republicans do not specify where $3 trillion of those cuts in discretionary spending would come from. It’s far easier to talk about general budget cuts than to spell out how much less funding they want for roads, schools and the military.
Mr. Biden’s insistence that House Republicans pass a clean debt-limit increase without any strings attached is the morally and economically correct course of action. But reality has to sink in. It would be wise for Mr. Biden to start talking seriously with Mr. McCarthy. Budget talks can remain on a separate path, but they need to commence.
while the editors of the Wall Street Journal are more sympathetic with the House Republicans:
Mr. Biden doesn’t seem to have figured out that the House vote changes the balance of negotiating power. Senate Majority Leader Chuck Schumer needs at least nine GOP votes to pass any debt limit increase, and that means he needs help from GOP leader Mitch McConnell. With the House vote in his back pocket, Mr. McConnell isn’t going to provide those votes for free, even if he had the power to do so on his own.
What part of divided government and bicameral legislature doesn’t the President understand? Perhaps he’s still under the illusion that he can refuse to negotiate and cause Republicans to panic as the debt deadline looms. No doubt the press corps will try to give him cover.
But Wall Street will grow increasingly anxious, and even some Democrats have noticed that Nancy Pelosi is now a backbencher. “While I do not agree with everything proposed,†Sen. Joe Manchin said of the House plan, “it remains the only bill moving through Congress that would prevent default and that cannot be ignored.â€
Mr. Biden’s refusal even to meet is weird given his long record as a politician willing to talk to the opposition. In 2012 as Vice President, he negotiated a deal to avoid the “fiscal cliff,†after President Obama’s haughty approach stalled. Mr. Biden reminisces occasionally about his younger years in the Senate, sparring with segregationists like Mississippi Democrat James Eastland. “We’d debate like hell on the floor of the Senate,†Mr. Biden said last year, “and go and have lunch together.â€
Yet Mr. Biden won’t meet with Mr. McCarthy to hash out a debt deal? Ms. Jean-Pierre said Thursday that Mr. McCarthy’s plan is “an extreme MAGA wish list,†and Republicans are “saying to the Senate, they’re saying to the President, that we have to go with this agenda in its full form.â€
No, they’re simply saying that the House has passed a bill to lift the debt limit, and Mr. McCarthy would like to negotiate a final deal with Mr. Biden that can get through both chambers and signed into law. If Mr. Biden won’t work with Republicans in the House and Senate on a compromise, then he’ll be responsible for the financial calamity he’s been warning about.
I think we need to take a lot of what the editors are saying with a substantial helping of salt. The Congress that committed to the spending (“This is about paying the money that Congress — in a largely bipartisan fashion — already committed to spend”) was a different Congress and Congresses’ ability to bind future Congresses is limited.
I also found the WaPo editors’ “in a perfect world” trope amusing. My version of perfection is obviously different from theirs. My version would include provisions like requiring the Congress to raise revenue when they increased spending beyond some percentage, e.g. the rate at which aggregate supply is growing.
However, the base purpose of the Congress is legislating negotiated deals. That’s what should happen here, too. I don’t know whether the House’s demands are a “MAGA wish list” or not. I’m open to suggestions one way or the other on that although I suspect that’s how the White House would characterize anything that passed a House with a Republican majority.
Like the editors of the Washington Post I think the White House should be open to negotiations with the Congress. If it takes “holding the debt ceiling hostage” to accomplish that, so be it.