CONGRESSIONAL KABUKI ASIDE, FEDERAL DEBT IS A REAL PROBLEM
Here we go again. House Republicans vow to block any increase in the federal debt limit without big cuts in spending. A Democratic president vows never to negotiate with hostage takers whose political stunt could trigger a global financial meltdown. The two parties spend months posturing and finger-pointing but never budge from dug-in positions. Then, with default hours away, the president and congressional leaders agree to temporary spending caps and a short-term increase in the debt ceiling — just enough to allow both sides to declare victory and kick the can down the road so they can do it all again two years later.
This tiresome charade has become so normalized that it barely registers with members of Congress — or their constituents — that they will spend the next six months spinning their wheels and neglecting other pressing problems.
The sudden determination of Republicans to lash themselves to the mast of fiscal responsibility after years of relentless tax cutting is the most obvious hypocrisy of this exhausting ritual. And their promise to balance the budget through spending cuts is nothing more than aspirational fantasy. Having already declared defense, veterans’ programs and border security to be sacrosanct, and acceded to Democratic bullying to take Social Security and Medicare off the table, the only way they can balance the budget is to wipe out all spending on everything else — the FBI, prisons, national parks, air traffic control, highways, K-12 funding, farm subsidies, college and small business loans, and disaster relief, to name a few. No wonder that, having announced their intention to take the debt ceiling hostage, Republicans have yet come up with a ransom note specifying their demands.
Democrats, meanwhile, coyly refuse to state how big of an increase in the debt ceiling they seek, concerned that they will be blamed for it. The truth is that most Democrats don’t worry much about debt or deficits. They cheered lustily last week as President Biden ticked off the big new programs he seeks — from universal prekindergarten and child tax credits to expanded home health care and free community college. And although the president vows to pay for all that new spending with increased taxes a big on millionaires, billionaires and large corporations, doing so won’t leave much for taming unsustainable deficits and preventing the looming insolvency of Social Security and Medicare.
And there’s the other glaring hypocrisy of this debt ceiling charade: By refusing to deal seriously with the fiscal time bomb, Democrats flirt with an economic calamity every bit as dangerous as the one they accuse the Republicans of fomenting.
No one can predict when and how such a financial crisis might unfold. What we can say is that, in just the past 15 years, the national debt has doubled as a percent of our national income, from around 60 percent of gross domestic product to 120 percent, and that it would be risky to go any higher. Put more simply, the national debt has gotten so big, it should no longer be allowed to grow
any faster than the economy which supports it. That’s an easier target than balancing the budget and eliminating the entire $1 trillion (and climbing) annual deficit. But it would still require Congress to fill a $375 billion hole in the annual budget.
$375 billion is a big number. To achieve it would require cuts to all discretionary spending, defense and non-defense, of about 20 percent. Or it would require an increase of income, payroll and corporate taxes of 8 percent. Or you could get there by cutting entitlement spending — mostly Social Security and Medicare — by 9 percent. Which is why anyone who has seriously thought about a grand bargain has concluded it requires doing some of all three.
The only thing both parties agree on is that such things must never be discussed. Republicans continue to peddle the supply-side fantasy that raising even a single tax will sap the economy of its vitality or throw it into recession. Democrats want us to believe that civilization as we know it would cease to exist if the retirement age were raised gradually by a year, or Social Security used a different method to calculate costof-living increases. And this kind of hyperbolic nonsense is now so ingrained in the identities of the parties, their leaders and voting base that even the slightest compromise becomes unthinkable.
So let’s be clear: The reason we keep having these debt ceiling charades isn’t because one party is fiscally responsible and the other isn’t.
It isn’t because it’s impossible to come up with a reasonable path to bring deficits and debt to sustainable levels. There are credible plans from think tanks and blue-ribbon commissions gathering dust on shelves all over Washington that could provide an outline for such a grand bargain. And there are pragmatists from both parties eager to hammer one out, if only party leaders would give them the political head room to try.
No, the simple explanation is that both parties prefer to take the economic risk of doing nothing than the political risk of bipartisan compromise.