Lots of posturing was prelude to a last-minute debt deal. The usual.
The best news for Republicans in the debt ceiling deal, assuming it passes Congress, is that after President Biden spent much of 2023 insisting he wouldn’t negotiate at all, he acceded to a bunch of demands from House Speaker Kevin McCarthy of Bakersfield:
• An inflation-adjusted reduction in direct spending on nonentitlement domestic spending.
• Paring back roughly $20 billion of the $80 billion that the Democratic-controlled Congress approved last year to bolster the Internal Revenue Service.
• Work requirements on federal food stamps and on family welfare benefits.
• Language to expedite a major natural gas pipeline from West Virginia to Virginia (congratulations, Sen. Joe Manchin III).
Perhaps the more intriguing political consequences aren’t in the deal itself. Biden and the White House kept congressional Democrats in the dark through much of the process, infuriating progressives and exacerbating his party’s divisions. The fact that so many Democrats feel Biden lost the messaging war on the debt ceiling is an ominous indicator for him in 2024.
The best news for Democrats in all this is that no one will have to handle another debt ceiling fight until after the next presidential election. The concessions are small details in the big picture of the U.S. economy, and in a month or two, very few Americans will remember much about this episode other than the fact that a deal was done. Most of the Republicans’ biggest and most sweeping proposals ended up on the cutting room floor, and Biden’s student-loan relief proposal — canceling up to $20,000 per borrower — remains intact (though it may not survive Supreme Court review).
If you subscribe to the metaphor of hostage-taking, what we have here is a scenario in which neither side is really willing to shoot the hostage, i.e., let the government default on the debt. Doing so likely would have had massive economic repercussions — putting at risk both McCarthy’s GOP House majority in 2024 and Biden’s chances for a second term. This wasn’t so much a hostage-taking as a hostage-saving effort.
The past several months have seen plenty of suggestions in the media that “this time it’s different.” Assuming the deal holds, the negotiations will turn out to have been . . . not all that different. Both sides insist they’ve made their best offer, the deadline gets closer, the news reports get more and more ominous, and then, as the clock ticks down toward the last minute, there’s a bit of movement and then suddenly a deal is reached.
Each side insists that it got what it wanted and maintains that the other side made the most consequential concessions, and everybody goes home and stops thinking about the debt ceiling until the next time the government gets within a couple hundred billion or so of hitting it.
People get nervous when negotiations creep closer and closer to the deadline . . . but often the deadline pressure is what makes both sides become more reasonable and conciliatory. When two sides start out as far apart as Biden and McCarthy did, striking a deal at the last minute is almost inevitable.
Sure, this agreement is a messy hodgepodge, and it involved a lot of posturing. But in the end, neither side had the leverage it wanted others to believe it did. Republicans still control only one chamber by a narrow majority. If they want deeper cuts to federal spending, they need to win a Senate majority and the presidency.
Biden likely knew that the 14th Amendment option — claiming that the debt ceiling was unconstitutional and instructing the Treasury Department to issue new debt — was, at minimum, at serious risk of being struck down by the Supreme Court. Less certain was how the markets, both at home and abroad, would react to such a move.
Americans hear plenty of yearning about the good old days of bipartisanship when Democrats and Republicans could sit down at the negotiating table and work out their disagreements. Well, that process looks like this — where your side gets some wins but not the big-ticket items you probably never had much of a chance of landing anyway. Negotiations like this very rarely end with the budgetary equivalent of unilateral surrender.
In November, Americans went to the polls and chose divided government — a slightly larger Senate Democratic majority and a new, small House Republican majority. This deal is the consequence of those votes. If Americans want something different, they’ll have an opportunity to pick new dealmakers in November 2024.