On Friday afternoon, with negotiations on legislation to raise the debt ceiling reportedly stalled, 66 members of the Congressional Progressive Caucus (CPC) sent a letter to the president urging him to invoke the 14th Amendment, one clause of which mandates the federal government to pay its bills, as an end-run around GOP obstructionism. Meanwhile, Senators Bernie Sanders (I-Vermont) and Elizabeth Warren (D-Massachusetts), along with high-profile House members such as Rep. Alexandria Ocasio-Cortez (D-New York), have kept up a drumbeat of social media criticism accusing the GOP of wanting to eviscerate social protections for the poor in order to satiate the tax-cutting demands of the super-wealthy.
But Joe Biden being Joe Biden, however, he’s unlikely to fully call the GOP’s bluff, hoping for a negotiated outcome to the standoff rather than a constitutionally untested reliance on the 14th Amendment. Given the extremism of today’s Republican Party, and the willingness of at least part of House Speaker Kevin McCarthy’s caucus to burn the whole ship of state down, that’s a risky strategy.
At some point in the next 10 days, if Treasury Secretary Janet Yellen’s forecasts are accurate, the U.S. stands to run out of money. Actually, to be accurate, there should be air quotes around that phrase, as in: The U.S. Stands to “Run Out” of Money.
In reality, the U.S. has been operating in the red for decades, and from the George W. Bush presidency onward it has made deficit spending a core part of the nation’s social compact: Put simply, as a country we like spending a lot of cash — on everything from missiles to Medicare, from Social Security and food stamps to spying — but we don’t like raising enough taxes to fully pay our bills. And, given the place of immense power and privilege that the U.S. has in the world, to date we’ve been remarkably lucky, with markets willing to lend the country trillions of dollars at spectacularly low interest rates. No other country on Earth could get away so easily with such irresponsible spending and taxation policies.
But that only works if those markets are super-confident in the U.S.’s reliability; that when it owes interest payments on its debt, it will pay, with no haggling, no tantrums, no efforts to somehow cut a bargain.
A loss of market confidence, triggered by an entirely manufactured and avoidable political crisis around Congress raising the debt ceiling, is what Yellen really means when she talks about the country running out of cash.
For the past several weeks, the White House and the congressional leadership have been involved in a prolonged back and forth mainly aimed at securing concessions from President Biden that an enfeebled McCarthy can take to his hardline caucus, the most extreme members of which have a virtual veto power over anything he does.
A month ago, the House passed a debt ceiling bill that included the promise of reducing across-the-board spending by 14 percent over a decade. Given it exempted the military, Social Security and Medicare from cuts, this would, if enacted, result in absolutely sweeping reductions to all other areas of federal spending, slashing education and environmental programs, putting a chainsaw to nutritional aid, eviscerating public health spending, and so on. This bill was nothing more than a political performance — and a bad performance at that — since neither the Democrat-controlled Senate nor the White House would seriously entertain such a measure.
Now, a month later, McCarthy’s red line in his negotiations is, supposedly, imposing 20-hour-per-week work requirements on able-bodied recipients of the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps, as well as Medicaid and Temporary Assistance for Needy Families (TANF). Given that most people on SNAP who genuinely can work do already work, and given that many of the low-wage jobs available come with no health benefits and shockingly low pay, these requirements would likely further immiserate people without genuinely encouraging them to secure footholds that would take them up the country’s economic ladder.
In fact, the proposal is a recycled version of ideas that have circulated within the GOP for 30 years: Republicans proposed a $16.5 billion cut to SNAP in 1995, and a $40 billion cut 18 years later. Under this version of the proposal, able-bodied adults under the age of 56 would have their food stamps cut off after three months unless the recipient was working. Some of the most hardline GOP congressmembers want that age cap increased to 65. They would be able to re-enroll again only after three years have elapsed, and then, once more, they would be limited to three months of benefits every three years.
None of this would even begin to make a dent in the country’s $31.4 trillion debt. Even the Foundation for Government Accountability, a conservative think tank that wholeheartedly embraces the workfare requirements, estimates it would only result in $149 billion in savings, spread out over several years. That may sound like a lot, but in the grand scheme of things, it’s financial chickenfeed — less than half a percent of the total amount of money the U.S. now owes to its creditors. For McCarthy to make this a red line in his negotiations over the debt ceiling is the worst kind of grandstanding; it has nothing to do with genuinely tackling the U.S.’s out-of-whack budget, and everything to do with blackmailing the Biden administration to impose destructive changes to the social safety net that the GOP has been unable to enact through normal legislative processes.
If McCarthy succeeds in securing these work requirements and then gives the green light to his caucus to vote in favor of raising the debt ceiling, the United States’ fiscal imbalance will still continue apace, and his caucus, which claims to be so fiscally responsible, will still have to vote for another debt ceiling increase months or years down the road. This is, after all, a problem largely created by the GOP’s tax-slashing ideology, by major tax-cuts under Ronald Reagan, George W. Bush and Donald Trump that have disproportionately benefited the wealthy and cost the Treasury tens of trillions of dollars over the last 40 years.
There are alternative ways out of this morass. Five years ago, the CPC proposed a people’s budget that massively ramped up public investments, but more than covered the extra spending by reforming the tax code to bring in trillions more dollars from large corporations and wealthy individuals who currently pay scandalously low taxes. The CPC ideas included a financial transaction tax and a carbon tax, both of which have been embraced in recent years by a slew of progressive economists. Had they been implemented, U.S. debt would have been shrinking over the past few years instead of dramatically increasing.
Yet, so long as the GOP has control of at least one branch of Congress, such ideas are dead on arrival. McCarthy’s GOP is not only averse to this sort of taxation, but even resists adequately funding the IRS so that it can collect the taxes owed under current law.
Unwilling to consider commonsense tax reforms, Republicans are instead holding hungry families hostage to their ideology. And they are doing so in a particularly dangerous manner, threatening the possibility of a U.S. debt default unless they get their way over the coming days.
If this game of brinksmanship goes wrong — as it all too easily might, given the hold that burn-it-all-down extremists have over McCarthy’s House leadership — the U.S., and by extension the global economy, will suffer a huge and entirely needless hit. If the U.S. does end up defaulting, the decades in which the country has been able to borrow on the cheap to fund tax cuts for the affluent, bloated military budgets, and a safety net system for the elderly will grind to a sudden halt. None of this will solve the U.S. debt crisis; it will, with higher interest rates and even greater political chaos, simply make it exponentially worse.