Deep in their hearts, Republicans know that if voters are ever forced to chose between progressive tax increases or cutting old age entitlements, they will soak the rich. Insofar as Republicans have a rational position, they are flailing around to obfuscate that choice to neutralize a losing issue.
This is basically a search for silver bullets. Cuts to old age entitlements can never be hidden. Any Congressional majority that meaningfully cuts social security or medicare will be decimated in the next election.
In the short run, making this a fight over debt rather than spending makes sense, because spending is popular and debt sounds icky. In the long term, Republicans can’t possibly get what they want. The smart ones know this and have left the cult of low taxes.
Given how poorly McCarthy’s speaker election went, I cannot see how he rallies House Republicans around any spending cutting plan. He’s always going to be facing several attention-seeking maniacs who will vote against any potential bill while screeching to their supporters about how McCarthy is a sellout RINO who is compromising with Biden. In the unlikely event that these extremists actually propose cuts, they’ll certainly be too politically unpopular to garner support from moderate Republicans.
So I imagine we’ll keep walking to the abyss of a financial crisis, and eventually moderate Republicans will feel compelled to work with the Democrats to avoid the financial armageddon of a US Treasury default. McCarthy will either get on board with this bipartisan coalition or he’ll be replaced. Even the WSJ is considering this to be a likely scenario given the lack of any plan of what House Republicans actually want. [1]
> All of which means Republicans will have to pick their spending targets carefully, explain their goals in reasonable terms so they don’t look like they want a default, and then sell this to the public as a united team. The worst result would be for Republicans to talk tough for months, only to splinter in a rout at the end, and be forced to turn the House floor over to Democrats to raise the debt limit with nothing to show for it. Opportunists on the right would then cry “sellout,” even if they had insisted on demands that were unachievable.
> This is what Democrats expect to happen, which is why they don’t think they need to negotiate. If Republicans want to use the debt limit as leverage, they need a strategy for how this showdown ends, not merely how it begins.
Enough with the discussion of gimmicks and tricks! the platinum coins, the super-high interest bonds, all of it! All that talk does nothing more than confuse the issue and feed the idea that the Republicans have some kind of leverage here, that some kind of magic trick is needed to defeat it. Treat this debt ceiling in grown-up fashion as the rather boring statutory interpretation problem that it is. Congress has passed conflicting laws, a general debt ceiling statute, and a bunch of more specific appropriations statutes that require the president to spend more money on specific things than the general debt ceiling statute would allow. To the extent it's not possible to comply with both statutes, the more specific statutes control under long-accepted canons of statutory interpretation. End of story. If Republicans in Congress don't like that interpretation of the law, they can either sue, or, better, actually *do their job* and pass a new law that reconciles the conflict.
You should have ended the article here, while you were ahead: "I think it’s important for Biden to maintain the posture that there’s no genuine financial crisis here, and one way or another he will see to it that the bills get paid."
Sooner or later something is gonna have to give on this. Either funding entitlements is going to require broad based tax increases, or we're going to have to get serious about spending cuts. The problem here, unfortunately, is democracy. Deficit financed government fundamentally breaks the democratic process. The people in the future who are on the hook for the spending reps are voting for are not the voters those reps are accountable to in the present. It's real easy to rob some other guy's future constituents to buy votes from your constituents today.
The problem with the deficit is way less about the economics and way more about the political incentives. I struggle to see how those incentives will ever align with a needed set of reforms without some sort of materially catastrophic crisis occuring first.
"Republicans are in a state of internal chaos" largely because the American people are in a state of chaos on the topic of taxes and spending. Plus having some wackos in the coalition. In survey after survey, the public doesn't want to raise taxes and doesn't want to cut spending. Meanwhile, the structural deficit grows.
Democrats have their own internal chaos on this topic -- they've pledged no tax increase on anyone making less than $400K / year.
I used to look at the fiscal policies of various South American countries, careening between hyperinflation and debt default, and think "I am glad we don't have those problems". My sympathy for their situation is quickly turning into empathy.
The public and elite understanding of the debt ceiling is mentioned briefly but is very important. The media landscape has changed and improved a lot. I think people forget how much the media took republicans side and blamed Obama for the standoff, in ways that tied his hands and somewhat forced him to negotiate. I think media figures thought buying into debt hysteria made them seem impartial. I don’t get that sense this time.
Honestly, Dems should do more to call Rebs bluff on this issue.
They should say "YES!!! WE DID SPEND TOO MUCH ON COVID! It really was a big nothingburger, and we need to tax back all that extra money that was thrown out into the economy during the Trump years. Jay Powell was even too busy printing money with low interest rates, low interest rates the average American doesn't get access to. We didn't know what we were up against, and now we know not all that money was spent wisely and a lot of scams took place and a lot of landlords got rich for doing nothing while people worked at home. If we're not going to cut spending, let's tax back that extra money, because otherwise there's no way to lower the deficit. Every once in a while Congress has to make hard decisions and make up for the mistakes of past congress's loose spending."
Validate some of the right wing populism, and provide a solution, while the Rebs flounder.
The only goals of the Freedom Caucus are fighting and obstructing the "Establishment," whether that be Democrats, the media, or RINO squishes. Their supporters expect them to fight. Doesn't matter over what. As long as they can be seen fighting on Fox News and talk radio, their supporters are satiated. That is all this is about. The Freedom Caucus learned in the Obama administration they could pick an easy fight over the debt ceiling that really pissed off their enemies, so they are going back to that well.
>>I already wrote this for Bloomberg, but I want to reiterate that Joe Manchin’s proposal to re-run the grand bargain commission idea from the Obama era actually makes sense this time around.<<
In isolation it's certainly not a crazy idea to look at the government's longer term fiscal situation. But I must say I really dislike the idea of broaching this as "an idea that makes sense" at this particular juncture. Is there a case to be made for austerity moving forward? Sure. I can read inflation charts as much as the next guy, but, in addition to the fact that we really aren't in some kind of fiscal crisis (nor anywhere close) at present, I hate—absolutely hate—the idea of *rewarding* the radical and nihilistic Freedom Caucus for making threats. They are vowing to literally cause grave harm to the country they serve by savaging its creditworthiness. It borders on treason.
I get that they say they want a small state. And some of them may even mean it. But some tactics are beyond the pale—I don't care how fervently you want to achieve the goal in question.
I am going to give Matt Gaetz and That Crazy Woman From Georgia more diabolical credit than they likely deserve: I think they are aiming for default.
It would be their Hail Mary shot. The economy seems to be improving under Biden, American society re-normalizing, the world rallying behind the Western order. A stable, prosperous, just, boring planet Earth has no place for the likes of them.
An economic calamity, on the other hand, one happening during a Democrat president, caused by them or not, gives them hope of advancement amid chaos. Chaos is a ladder, as Littlefinger would say; you only need climb.
Keep in mind, of course, like all villain Hail Mary plans, it is a stupid plan that likely will not work. A default caused by a crazy, fractious Republican House will likely be blamed on said Republican House. It would also likely end the Republican party as we know it, no matter how ruthless Trump is or cunningly conniving DeSantis is.
But that doesn't mean a couple of stupid, vain politicians elected by stupid, vain local (gerrymandered) majorities don't want to try it. We'll see if they're able to carry all before them in a few months.
"But today — with a deeper public understanding of the issue, a clearer position from the White House on what they want, better elite comprehension of the available options, and a GOP whose stance on the issue is completely unclear — I don’t really think that leverage exists."
Uh, I'm going to pushback harshly on this. I think you're being wildly optimistic that a debt limit showdown wouldn't be much much more harmful to Biden then GOP in Congress. You're idea that the public has a much more sophisticated understanding than 2011 seems pretty off base to me. If you're talking about readers of substacks, NYTimes opinion columnists who used to write the "Wonk blog" or economics writers who write for The Atlantic and have podcasts on The Ringer, then yes this group of people have a reasonably sophisticated understanding of who's driving this debt ceiling standoff. But as you very very correctly remind us all the time, the median voter is a working class white guy over 50 living in the suburbs; a demographic likely very underrepresented in the group of people I listed above. Furthermore, I think you're wildly overestimating how much swing voters nowadays have a "sophisticate" understanding of what's going on. What they'll notice is a severe recession with massive job losses that very likely would result from a debt ceiling breach. If you want some proof go look at Biden approval rating and gas prices this past year (heck look at 538 recently where Biden's approval rating has ticked slightly downward again just at the same time there has been small increase in gas prices).
Also, I think you're also overestimating the sophistication of mainstream media, especially mainstream media personalities that have pretty far reach. The New York Times politics desk still exists; Peter Baker was on Meet the Press just this Sunday. The "hawks on both sides could not come to an agreement on a debt ceiling increase" take is basically probably prewritten to be belched out some point in June if necessary. Speaking of Meet the Press, honest to god, you really think Chuck Todd is going squarely point the finger at GOP intransigence and lack of actual plan as the reason a debt ceiling breach occurred? No he's going to have Chris Christie and Maureen Dowd on to talk about "how is it both sides couldn't come together here for the good of the country?".
So if you're wondering what the GOP plan, their (probably correct) response is we don't need a plan, Biden is the one who will suffer most and RDS or Trump will just cruise to victory (as has been noted many times, swing voters latch on to personalities when voting for President). In fact not having a plan is a form of leverage. Nothing to negotiate. The whole point is "Look at me, I have the biggest dick..aren't I wonderful". And if you think I'm being too vulgar here, remember the last President literally grabbed his crotch on the GOP debate stage in early 2016. Also, if you don't think the epithet "Little Marco" doesn't have very very close to the surface undertones about penis size, then I have a bridge to sell you.
One last point. I feel like it's being lost that Trump tried his absolute hardest to get severe Medicaid cuts passed. ACA repeal didn't die in committee like Bush's social security privatization. It came within one vote multiple times of passing. Remember it wasn't just McCain's thumbs down. There was "skinny" repeal that was shut down by Rand Paul for reasons that I'm still at a loss to explain. You brought up Medicaid cuts and that GOP didn't seem interested in actually pursuing, but I think that's wildly wrong.
Loving the new focus on municipal bond quirks as a way out of crisis. I'm embarrassed that I didn't know it was McCormick Place that issued high coupon bonds. To any other muni nerds out there, do you think any of our other tools would fit the bill here? Like appropriation debt (not really a debt obligation, since Treasury isn't obligated to pay if Congress doesn't appropriate, so maybe it technically doesn't count)? Or a sale-leaseback of, I don't know, the Statue of Liberty, where the Statue of Liberty Financing Corporation (Liberty Bonds for short...) issues bonds backed by lease payments made by the Treasury? If you think this sounds wacky and no one would possibly buy a bond like that, you're clearly not a muni person.
Replacing pensions with 401(k) plans (many of which have absolutely lousy employer matching rates) made social security more necessary than ever for the middle class. It’s so brutal to think about the nihilism involved with people that that essentially want to make retirement as hazardous as possible for everyone but the very rich.
Deep in their hearts, Republicans know that if voters are ever forced to chose between progressive tax increases or cutting old age entitlements, they will soak the rich. Insofar as Republicans have a rational position, they are flailing around to obfuscate that choice to neutralize a losing issue.
This is basically a search for silver bullets. Cuts to old age entitlements can never be hidden. Any Congressional majority that meaningfully cuts social security or medicare will be decimated in the next election.
In the short run, making this a fight over debt rather than spending makes sense, because spending is popular and debt sounds icky. In the long term, Republicans can’t possibly get what they want. The smart ones know this and have left the cult of low taxes.
Given how poorly McCarthy’s speaker election went, I cannot see how he rallies House Republicans around any spending cutting plan. He’s always going to be facing several attention-seeking maniacs who will vote against any potential bill while screeching to their supporters about how McCarthy is a sellout RINO who is compromising with Biden. In the unlikely event that these extremists actually propose cuts, they’ll certainly be too politically unpopular to garner support from moderate Republicans.
So I imagine we’ll keep walking to the abyss of a financial crisis, and eventually moderate Republicans will feel compelled to work with the Democrats to avoid the financial armageddon of a US Treasury default. McCarthy will either get on board with this bipartisan coalition or he’ll be replaced. Even the WSJ is considering this to be a likely scenario given the lack of any plan of what House Republicans actually want. [1]
> All of which means Republicans will have to pick their spending targets carefully, explain their goals in reasonable terms so they don’t look like they want a default, and then sell this to the public as a united team. The worst result would be for Republicans to talk tough for months, only to splinter in a rout at the end, and be forced to turn the House floor over to Democrats to raise the debt limit with nothing to show for it. Opportunists on the right would then cry “sellout,” even if they had insisted on demands that were unachievable.
> This is what Democrats expect to happen, which is why they don’t think they need to negotiate. If Republicans want to use the debt limit as leverage, they need a strategy for how this showdown ends, not merely how it begins.
[1] https://www.wsj.com/articles/the-hard-reality-of-a-debt-ceiling-showdown-house-republicans-congress-gop-11673904239
Enough with the discussion of gimmicks and tricks! the platinum coins, the super-high interest bonds, all of it! All that talk does nothing more than confuse the issue and feed the idea that the Republicans have some kind of leverage here, that some kind of magic trick is needed to defeat it. Treat this debt ceiling in grown-up fashion as the rather boring statutory interpretation problem that it is. Congress has passed conflicting laws, a general debt ceiling statute, and a bunch of more specific appropriations statutes that require the president to spend more money on specific things than the general debt ceiling statute would allow. To the extent it's not possible to comply with both statutes, the more specific statutes control under long-accepted canons of statutory interpretation. End of story. If Republicans in Congress don't like that interpretation of the law, they can either sue, or, better, actually *do their job* and pass a new law that reconciles the conflict.
You should have ended the article here, while you were ahead: "I think it’s important for Biden to maintain the posture that there’s no genuine financial crisis here, and one way or another he will see to it that the bills get paid."
Sooner or later something is gonna have to give on this. Either funding entitlements is going to require broad based tax increases, or we're going to have to get serious about spending cuts. The problem here, unfortunately, is democracy. Deficit financed government fundamentally breaks the democratic process. The people in the future who are on the hook for the spending reps are voting for are not the voters those reps are accountable to in the present. It's real easy to rob some other guy's future constituents to buy votes from your constituents today.
The problem with the deficit is way less about the economics and way more about the political incentives. I struggle to see how those incentives will ever align with a needed set of reforms without some sort of materially catastrophic crisis occuring first.
"Republicans are in a state of internal chaos" largely because the American people are in a state of chaos on the topic of taxes and spending. Plus having some wackos in the coalition. In survey after survey, the public doesn't want to raise taxes and doesn't want to cut spending. Meanwhile, the structural deficit grows.
Democrats have their own internal chaos on this topic -- they've pledged no tax increase on anyone making less than $400K / year.
I used to look at the fiscal policies of various South American countries, careening between hyperinflation and debt default, and think "I am glad we don't have those problems". My sympathy for their situation is quickly turning into empathy.
If you’re trying to portray something as a smart financial decision, then calling it the “Chicago Model” probably isn’t the best branding
The public and elite understanding of the debt ceiling is mentioned briefly but is very important. The media landscape has changed and improved a lot. I think people forget how much the media took republicans side and blamed Obama for the standoff, in ways that tied his hands and somewhat forced him to negotiate. I think media figures thought buying into debt hysteria made them seem impartial. I don’t get that sense this time.
Honestly, Dems should do more to call Rebs bluff on this issue.
They should say "YES!!! WE DID SPEND TOO MUCH ON COVID! It really was a big nothingburger, and we need to tax back all that extra money that was thrown out into the economy during the Trump years. Jay Powell was even too busy printing money with low interest rates, low interest rates the average American doesn't get access to. We didn't know what we were up against, and now we know not all that money was spent wisely and a lot of scams took place and a lot of landlords got rich for doing nothing while people worked at home. If we're not going to cut spending, let's tax back that extra money, because otherwise there's no way to lower the deficit. Every once in a while Congress has to make hard decisions and make up for the mistakes of past congress's loose spending."
Validate some of the right wing populism, and provide a solution, while the Rebs flounder.
The only goals of the Freedom Caucus are fighting and obstructing the "Establishment," whether that be Democrats, the media, or RINO squishes. Their supporters expect them to fight. Doesn't matter over what. As long as they can be seen fighting on Fox News and talk radio, their supporters are satiated. That is all this is about. The Freedom Caucus learned in the Obama administration they could pick an easy fight over the debt ceiling that really pissed off their enemies, so they are going back to that well.
Pleased to meet you
Hope you guessed my name
But what’s puzzling you
Is the nature of my game
- House Republicans
Just when it seems we somehow might get a soft landing gop is going ”hold my beer” :(
>>I already wrote this for Bloomberg, but I want to reiterate that Joe Manchin’s proposal to re-run the grand bargain commission idea from the Obama era actually makes sense this time around.<<
In isolation it's certainly not a crazy idea to look at the government's longer term fiscal situation. But I must say I really dislike the idea of broaching this as "an idea that makes sense" at this particular juncture. Is there a case to be made for austerity moving forward? Sure. I can read inflation charts as much as the next guy, but, in addition to the fact that we really aren't in some kind of fiscal crisis (nor anywhere close) at present, I hate—absolutely hate—the idea of *rewarding* the radical and nihilistic Freedom Caucus for making threats. They are vowing to literally cause grave harm to the country they serve by savaging its creditworthiness. It borders on treason.
I get that they say they want a small state. And some of them may even mean it. But some tactics are beyond the pale—I don't care how fervently you want to achieve the goal in question.
I am going to give Matt Gaetz and That Crazy Woman From Georgia more diabolical credit than they likely deserve: I think they are aiming for default.
It would be their Hail Mary shot. The economy seems to be improving under Biden, American society re-normalizing, the world rallying behind the Western order. A stable, prosperous, just, boring planet Earth has no place for the likes of them.
An economic calamity, on the other hand, one happening during a Democrat president, caused by them or not, gives them hope of advancement amid chaos. Chaos is a ladder, as Littlefinger would say; you only need climb.
Keep in mind, of course, like all villain Hail Mary plans, it is a stupid plan that likely will not work. A default caused by a crazy, fractious Republican House will likely be blamed on said Republican House. It would also likely end the Republican party as we know it, no matter how ruthless Trump is or cunningly conniving DeSantis is.
But that doesn't mean a couple of stupid, vain politicians elected by stupid, vain local (gerrymandered) majorities don't want to try it. We'll see if they're able to carry all before them in a few months.
"But today — with a deeper public understanding of the issue, a clearer position from the White House on what they want, better elite comprehension of the available options, and a GOP whose stance on the issue is completely unclear — I don’t really think that leverage exists."
Uh, I'm going to pushback harshly on this. I think you're being wildly optimistic that a debt limit showdown wouldn't be much much more harmful to Biden then GOP in Congress. You're idea that the public has a much more sophisticated understanding than 2011 seems pretty off base to me. If you're talking about readers of substacks, NYTimes opinion columnists who used to write the "Wonk blog" or economics writers who write for The Atlantic and have podcasts on The Ringer, then yes this group of people have a reasonably sophisticated understanding of who's driving this debt ceiling standoff. But as you very very correctly remind us all the time, the median voter is a working class white guy over 50 living in the suburbs; a demographic likely very underrepresented in the group of people I listed above. Furthermore, I think you're wildly overestimating how much swing voters nowadays have a "sophisticate" understanding of what's going on. What they'll notice is a severe recession with massive job losses that very likely would result from a debt ceiling breach. If you want some proof go look at Biden approval rating and gas prices this past year (heck look at 538 recently where Biden's approval rating has ticked slightly downward again just at the same time there has been small increase in gas prices).
Also, I think you're also overestimating the sophistication of mainstream media, especially mainstream media personalities that have pretty far reach. The New York Times politics desk still exists; Peter Baker was on Meet the Press just this Sunday. The "hawks on both sides could not come to an agreement on a debt ceiling increase" take is basically probably prewritten to be belched out some point in June if necessary. Speaking of Meet the Press, honest to god, you really think Chuck Todd is going squarely point the finger at GOP intransigence and lack of actual plan as the reason a debt ceiling breach occurred? No he's going to have Chris Christie and Maureen Dowd on to talk about "how is it both sides couldn't come together here for the good of the country?".
So if you're wondering what the GOP plan, their (probably correct) response is we don't need a plan, Biden is the one who will suffer most and RDS or Trump will just cruise to victory (as has been noted many times, swing voters latch on to personalities when voting for President). In fact not having a plan is a form of leverage. Nothing to negotiate. The whole point is "Look at me, I have the biggest dick..aren't I wonderful". And if you think I'm being too vulgar here, remember the last President literally grabbed his crotch on the GOP debate stage in early 2016. Also, if you don't think the epithet "Little Marco" doesn't have very very close to the surface undertones about penis size, then I have a bridge to sell you.
One last point. I feel like it's being lost that Trump tried his absolute hardest to get severe Medicaid cuts passed. ACA repeal didn't die in committee like Bush's social security privatization. It came within one vote multiple times of passing. Remember it wasn't just McCain's thumbs down. There was "skinny" repeal that was shut down by Rand Paul for reasons that I'm still at a loss to explain. You brought up Medicaid cuts and that GOP didn't seem interested in actually pursuing, but I think that's wildly wrong.
Loving the new focus on municipal bond quirks as a way out of crisis. I'm embarrassed that I didn't know it was McCormick Place that issued high coupon bonds. To any other muni nerds out there, do you think any of our other tools would fit the bill here? Like appropriation debt (not really a debt obligation, since Treasury isn't obligated to pay if Congress doesn't appropriate, so maybe it technically doesn't count)? Or a sale-leaseback of, I don't know, the Statue of Liberty, where the Statue of Liberty Financing Corporation (Liberty Bonds for short...) issues bonds backed by lease payments made by the Treasury? If you think this sounds wacky and no one would possibly buy a bond like that, you're clearly not a muni person.
Replacing pensions with 401(k) plans (many of which have absolutely lousy employer matching rates) made social security more necessary than ever for the middle class. It’s so brutal to think about the nihilism involved with people that that essentially want to make retirement as hazardous as possible for everyone but the very rich.