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Seventeen thoughts on the debt ceiling deal
A pretty good deal — but a very bad process
Some scattered thoughts on the debt ceiling deal:
If you ignore everything about the circumstances of how this came together, it’s really not a bad deal.
In particular, the big GOP win here is that they forced Biden to agree to flat nominal discretionary spending for one year and then a one percent nominal increase the year after that, which is a significant cut in inflation-adjusted, per capita, or GDP terms. But that’s something Republicans could (and would) have gotten through the normal appropriations process anyway.
The way appropriations work is that if a new bill isn’t signed by the end of the fiscal year, the government shuts down. But Congress often avoids shutdowns during disputes by passing what’s called a continuing resolution, which just says all appropriations can continue at the previous level for X weeks.
Even if Biden didn’t “agree” to a two-year spending cap, House Republicans would have kept passing CRs which — by definition — are flat in nominal terms. Biden then would have had to either sign them (in which case funding is flat) or else refused to sign them, instigating a government shutdown that would have made him look ridiculous.
None of this is to say that the discretionary spending cuts aren’t a genuine policy and ideological win for the GOP; it’s just to point out that these are wins they could have achieved through other means.
Going back to the 2011 debt ceiling fight or even what Republicans were saying last fall, the point of debt ceiling hostage-taking was supposed to be to win spending concessions that can’t be won through the normal appropriations process — i.e., changes to Social Security, Medicare, and Medicaid.
If you want to understand how Biden ended up with his back to the wall in this deal, you have to remember that this was the original conservative aspiration. Biden’s plan was to bait Republicans into proposing cuts to these programs and then hammer them over the head with it. But they backed down on substance, which gave them the political high ground. A lot of progressives believe the GOP never does this, but it’s actually pretty common.
It’s important to remember that the macroeconomic situation of 2023 is totally different from the situation in 2011. Back then, the push to cut spending wasn’t just an ideological pet project of Republicans, it was an act of economic sabotage that crippled growth for years. Today, things are different. Reducing the deficit exclusively on the spending side — and exclusively on the discretionary side at that — is not what I would have done, but it is helpful in terms of inflation and will just limit the extent to which the Fed raises interest rates.
My guess is the White House will like points 1-4 here, but it’s fundamentally wrong to ignore the circumstances of how this came together. Joe Biden, Chuck Schumer, Nancy Pelosi, and other progressive movement leaders messed this up repeatedly over a period of years. I exempt Hakeem Jeffries from criticism on the grounds that he’s too new, but I hope he learns the lesson here.
By giving Republicans a policy win in this way rather than through the normal appropriations process, Biden has validated the debt ceiling hostage tactic. That meaningfully increases the odds of a future substantive disaster, either in terms of policy concessions or a breach.
The debt ceiling standoff itself has, as the White House itself acknowledged, been damaging to the economy and to the world’s confidence in the United States.
While I don’t think the non-appropriations aspects of this deal are particular bad, they do exist and Democrats could have gotten themselves a better deal if they’d entered the negotiation with more leverage, which they could have had if they’d had a better strategy.
In the short-term, dismissing the viability of the strategies around the 14th Amendment, the platinum coin, and premium bonds was a huge mistake. The spin that this wouldn’t work because of judicial uncertainty won’t hunt. The president could — and should! — have said that his preference was to avoid using those options because of his limited confidence in the courts and because the financial system doesn’t like wackiness. But he still should have preserved them as options he would prefer to use rather than signing a terrible deal. In any kind of negotiation, you need a Best Alternative to a Negotiated Agreement (BATNA) and “I’m going to sell premium bonds and fight it out in court” is a much better BATNA than “there’s going to be a default.”
In the longer-term, it was a mistake not to have addressed this back when Democrats controlled congress. The proximate reason it wasn’t taken care of back then is that Joe Manchin (and Kyrsten Sinema and probably quietly some others) didn’t love the idea. But it would have been wiser for Democratic leaders to make concessions on other topics in order to get what they needed from the moderates.
Going back even further, the true fiasco here was how Democrats handled this during the Trump Era. After a little bit of posturing, Pelosi and Schumer consistently gave Trump basically clean debt ceiling increases. What they should have done was held out for elimination in order to avert the threat of this happening in a post-Trump administration. It probably would have worked. What did Trump care about setting up congressional Republicans for a spending fight in a future Democratic administration? The problem is Dem congressional leaders apparently didn’t care about this either — but they should have.
Beyond the appropriations levels, the deal seems to have two main elements: an expansion of work requirements and eligibility limits for TANF and SNAP, and some changes to permitting.
On the merits, work requirements are dumb. I was especially concerned about the prospect of bringing them into play for Medicaid, which appears not to have happened. Because TANF operates under a fixed global budget, work requirements there don’t even save any money — but the flip side from a progressive point of view is that everyone who loses benefits due to paperwork snafus just frees up more money for other people. It’s petty and cruel but not a huge deal.
The SNAP changes, by contrast, seem genuinely bad to me. If I understand the deal correctly, the changes only impact childless people below 55, which is a pretty small universe, but it’s still not a good change. To contextualize, though, the Biden administration made SNAP benefits much more generous back in the early days of the administration. So on net, SNAP is still expanding in the Biden years.
I tend to think the ferocity with which the GOP is now pushing for work requirements here tends to undermine the basic rationale for SNAP as a program. If you look at what you can buy with SNAP, it’s clearly not much of a “nutrition” program — you can use it to buy soda, for example. But beyond that, SNAP benefits are highly fungible. You can’t buy cigarettes with SNAP, but 20 years ago my neighbor and I used to have a deal where I traded her cigarettes for Diet Coke because she could buy that with her SNAP card. The cash-like nature of SNAP was a virtue from the standpoint of people like me who think poor people should be given money so they can be less poor. But the American political system seemed to feel strongly that it was okay to hand out in-kind benefits (SNAP and Medicaid) without a work requirement, but that cash needed to be linked to work. Back when I was making these trades, George W. Bush was president and he was expanding SNAP. If Republicans have decided that SNAP is no more acceptable to them than cash, then we really ought to fight for a universal cash benefit for kids, supplemented by some kind of actual nutrition program (free vegetables, I dunno) and accept that in the long-run, SNAP is probably not going to be viable.
I’m very favorably disposed to permitting reform and efforts to curtail the environmental review process. Exactly how big of a deal this is and how good it is hinges a lot on the details, which do not seem fully clear at this point and may not even have been fully fleshed-out by the principals. This is a good example of an area where the White House having more leverage would have been useful, though, in order to maximize the extent to which permitting reforms address things Biden cares about (renewables transmission, chip fab plants, interstate rail) rather than just natural gas export terminals or whatever.
Point (5) is really important here. This is not like the Obama-era pivot to austerity. If anything, the big problem with this deal qua fiscal deal is just that it’s much too small. There should be tax increases! And those should be paired with changes to Social Security and Medicare. As long as the full employment era persists, we are going to be in a politics of fiscal tradeoffs. This package is the beginning, not the end.
If I may venture a general observation about the Biden Era, I don’t think it’s a coincidence that this process has felt much more humiliating to the White House than the Obama Era equivalent and yet the substantive outcome is a lot better. Biden frustrated a lot of his allies on the Hill over the past month by not having more of a communications strategy, but the best insight the president has brought to all his bipartisan legislating is that the less said the better in order to negotiate in private around real demands rather than in public around positions. Case in point, part of this deal is a modest trim to Democrats’ plans to fund the tax police. That’s borderline absurd — of all the spending to cut, why one that increases the deficit? But the reason is Republicans love rich tax cheats! You could call them out on their hypocrisy or you can give them a win that matters a lot to them and that is compatible with Biden’s main priorities.
Last but not least, a lot of oxen were gored in this deal from a progressive point of view, but IRA climate funding was not. This is the thing the Climate Left keeps not acknowledging — Democratic Party elites very deeply and sincerely care about their pet issue and try extremely hard to give them wins. Which is fine. But the favorite children of the coalition ought to repay the favor and try to be nice, helpful, and cooperative rather than pretending that they are leading a grassroots mass movement that needs to bring pressure to bear on a recalcitrant political system.
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