If the debt ceiling deal between President Biden and Speaker Kevin McCarthy wins Congressional approval, it will tell us a lot about what this Republican Party cares about and how it really works. And it will have proved something important about what lines Democrats can hold and which they can’t.
The deal Biden and McCarthy struck is a modest package of spending nips and safety-net tucks. Some of the policy is stupid (like cutting funding for I.R.S. enforcement) and some of it is cruel (like adding work requirements for some older adults who need food stamps) but what is most surprising about the package is its size. It’s about a $69 billion cut to spending next year and a $112 billion cut in 2025, with no significant budget caps or automatic cuts kicking in after two years. It leaves Biden’s major achievements, from the Inflation Reduction Act to student loan cancellation, intact.
Threatening default — and we came within days of it this time — in order to get a deal like this is like threatening to detonate a bomb beneath the bank unless the teller gives you $150 and a commemorative mug. It’s a bizarre mismatch of means and ends.
For me, this deal offers more questions than answers. Here are four of them.
First, do we actually have a deal? Ultraconservative House Republicans forced Kevin McCarthy to endure 14 humiliating failed votes — and make a slew of concessions — to win the speakership. The message seemed clear: He served at their pleasure. And after agreeing, as part of the deal that won him the gavel, to allow any dissatisfied member to call a vote on his speakership at any time, he could not risk their displeasure. That was where the danger of default lurked. A deal between Biden and McCarthy was always possible. A deal that would satisfy Biden, McCarthy and the Freedom Caucus was not.
But McCarthy isn’t acting as if he needs to keep his right flank happy. “Some $4 Trillion in debt for — at best — a two year spending freeze and no serious substantive policy reforms,” tweeted Representative Chip Roy, a prominent member of the Freedom Caucus. “#NoDeal.” Roy is also accusing McCarthy of betraying promises he made to win the speakership.
The expectation, on all sides, is that McCarthy will do what past Republican speakers did and cover conservative defections with Democratic votes. Perhaps that will fail, and the deal will dissolve on the floor. Already, Republican presidential aspirants like Ron DeSantis are trying to destroy the agreement from the outside. Still, if McCarthy can run this play and survive it, then his speakership looks stronger and more stable than its troubled birth suggested. But then what was the point of those 14 votes his colleagues put him through? Which brings me to my next question.
What do Republicans actually want? The deal that resolved the 2011 debt ceiling crisis included almost a trillion dollars of cuts over 10 years and created a “supercommittee” that had to agree on $1.5 trillion more in deficit reduction. It also created a backup mechanism that would hammer down more than a trillion dollars in automatic cuts if the supercommittee failed.
It was terrible policy, sucking demand out of an economy that desperately needed more spending. But the deal reflected a clear view within the Republican Party, which was that deficits were out of control, spending was the problem and policy success was to be measured in dollars of spending cut.
This was the period in which Paul Ryan was rising to the heights of Republican Party politics by promising to privatize and cut Medicare, gut Medicaid, repeal Obamacare and sharply constrain federal spending. Ryan’s positions were so popular within the party that he became Mitt Romney’s pick for vice president and, after Romney lost, speaker of the House.
Today’s Republican Party is different. McCarthy, following in Donald Trump’s footsteps, declared Social Security and Medicare and military spending sacrosanct. Republicans made no serious move to repeal Obamacare or slash Medicaid. They have confined themselves mostly to proposing cuts to nondefense discretionary spending — which accounts for only about a sixth of annual federal spending and is the part of the budget that is already projected to shrink in the coming years.
There is no obvious question about the country’s fiscal future that the Republican Party’s current policies propose an answer to. If you are worried about future deficits or the size of government and you don’t want to raise taxes, then you have to cut Social Security, Medicare and other health programs and military spending. But Republicans don’t want to do any of that.
When will Democrats wise up on the debt ceiling? In 2010 and 2011, the Obama administration negotiated over the debt ceiling in part because it wanted a debt deal. The administration had pivoted to austerity — wrongly, in my view — and it used the debt ceiling to trade with Republicans for policies, like defense cuts, it supported but couldn’t get any other way.
Biden’s position, at least rhetorically, was different. He swore he would never negotiate over the debt ceiling. But then he did exactly that. This deal is built out of Republican policy demands. It’s not a terrible deal, in the sense that the concessions are small. But what Biden and the Democrats got out of this was a debt ceiling increase. There was no attempt, as there was in the Obama administration’s negotiations, to find a bipartisan deal that achieved major administration aims.
Which is all to say that Biden proved something that Democrats should already have known. As long as the debt ceiling exists, there is no way to avoid negotiating over the debt ceiling. The various workarounds that have been proposed — the 14th Amendment, minting a multitrillion-dollar platinum coin, “premium bonds” — carry too much legal and market risk. The way to get rid of the debt ceiling is to get rid of the debt ceiling. Democrats should have done that when they held power in 2021 and 2022. They should prioritize it when they next get a chance.
Are bipartisan debt deals dead? Defenders of the debt ceiling will tell you that it’s often the forcing mechanism for bipartisan debt deals, and as such, does more good than harm. I suspect those days are over. Debt ceiling negotiations have become structurally unbalanced in a way that will make larger debt deals impossible.
Republicans see raising the debt ceiling as the main concession they’re offering Democrats. Because of that, they have no reason to bargain over a balanced policy package in which Democratic priorities, like tax increases, are part of the deal.
Democrats want to break the Republican Party of the habit of using the debt ceiling as leverage. Biden can sell this deal to his party only because it is small. If it were larger, there would be few Democratic votes to pass it, as Democrats would see it as both bad policy and catastrophic precedent.
The debt debates of 2010 are, again, a good comparison here. The debt ceiling fight and the supercommittee came after the report of the Simpson-Bowles Commission. The big bipartisan debt deal that so many sought never materialized, but it wasn’t for lack of trying. There is no similar suite of attempts to build a framework for compromise today.
The irony is that 2010 was a terrible time to be thinking about deficit reduction. But 2023 isn’t. I would rank deficits far lower on the list of worries than, say, climate change and A.I. and great powers’ conflict, but still: The Congressional Budget Office projects interest payments on the debt to rise from 1.6 percent of G.D.P. in 2022 to 7.2 percent in 2052. No one wants that. And right now, inflation is high, the labor market is tight, and the Fed is raising interest rates because the economy could do with a bit of cooling. This a pretty reasonable moment to nudge the budget onto a sounder path.
I’m pretty certain Biden would welcome the opportunity to broker a grand budget bargain. That’s the kind of deal he’s made over and over again in his career. But he would need a Republican Party willing to accept tax increases and willing to negotiate a bill that would bolster him in 2024, and that’s not this Republican Party.
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