In the debt ceiling standoff, Republicans are holding the global economy hostage, demanding a ransom payment that consists of gutting the U.S. social safety net, rapid approval of fossil fuel projects, cuts to education and national park budgets, and more.
Their strategy appears to be working. On Saturday night, House Speaker Kevin McCarthy (R-Calif.) announced he and Biden had reached a tentative “agreement in principle” to raise the debt ceiling that includes new work requirements on social programs and cuts to the federal budget. McCarthy said details of the agreement would be released Sunday, and lawmakers are expected to vote on it this upcoming Wednesday.
President Joe Biden, a famously bad negotiator who has pushed for cuts to social programs in the past, has negotiated with the hostage takers. Lawmakers in his own party are reportedly “anxious” that the president has been ignoring the old adage about negotiating with terrorists. In other words, the current standoff over the debt ceiling looks like the Washington Generals (Democrats) deliberately getting pantsed and preparing to lose to the Harlem Globetrotters (Republicans).
“Washington Generals express regrets about deliberately getting pantsed and losing to the Globetrotters” pic.twitter.com/CUPFp8hKtH— David Sirota (@davidsirota) May 24, 2023
The current standoff over the debt ceiling is a pathetic spectacle. Initially designed to allow the United States to borrow money during World War I, the debt ceiling now exists as an arbitrary limit on government borrowing that Congress raises pro forma each time the country approaches that cap. But sometimes, lawmakers use the threat of a default — which could cause millions of people to lose their jobs, a freeze on Social Security payments, a spike in U.S. borrowing costs, and a recession that would reverberate across the world — as a nuclear bargaining chip to impose austerity measures.
The standoff gives cover to politicians and dark money interests to push unpopular and punitive cuts under the guise of negotiating over the debt ceiling.
If you don’t believe me, check out the evidence yourself.
Republicans, led by McCarthy, proposed defunding the Internal Revenue Service (IRS), which will actually reduce revenue by defanging tax auditors and enabling even more tax evasion by the wealthy and corporations. Republicans slashed funding for the IRS in 2011, have vilified the agency for targeting the tax-exempt status of Tea Party groups, and probably want to protect their wealthy corporate donors from audits. Even as corporations have seen rising profits over the past couple of decades, their tax payments have not increased. Biden is reportedly on board with some IRS cuts.
Republicans also reportedly shot down a proposal to close the carried interest loophole, which allows private equity and hedge fund executives to pay a substantially lower tax rate on their income than other top earners, costing the United States anywhere from $18 to $180 billion a decade.
For his part, Biden has enabled an illegal $50 billion tax giveaway, mostly to millionaires and billionaires, even though his IRS could stop the upward transfer of wealth.
McCarthy claims “The problem is… not revenue, the problem is spending," which perhaps isn’t surprising, since his party is pushing to extend Trump’s 2017 corporate tax breaks, which could cost more than $3 trillion over the next decade.
But on the spending front, McCarthy proposed a spending increase for the military, and substantial cuts for nearly the rest of the government.
The Pentagon budget is so bloated and poorly accounted for that when officials spotted a $3 billion “accounting error” earlier this month, nobody batted an eye. That’s not new for the Department of Defense, which failed its fifth audit in a row last year and could not even account for half of its $3.5 trillion in assets.
McCarthy’s proposal to slash discretionary spending in the non-military parts of the budget without any new revenue would have required draconian cuts to federal enforcement agencies and social programs. His ideas included: kicking millions of people off food assistance and Medicaid, repealing the signature climate law passed last year, laying off workers, and increasing processing times at the Social Security Administration, among others.
The backdrop for all of these antics is that the U.S. government is constitutionally obligated to make good on its debt. The executive can’t refuse to spend money authorized by Congress, which retains the power of the purse. Congress also has to make good on its contracts — to pay federal workers and to provide health insurance, for example.
Progressives had called on Biden to reject spending cuts and instead invoke the 14th Amendment provision that the “validity of the public debt… shall not be questioned” to avert a crisis, but Biden shot down the idea. The Treasury Department could mint a trillion-dollar coin to pay government expenses — a gimmick commensurate with the farce of a “debt ceiling” — but Treasury Secretary Janet Yellen didn’t like the idea. Other constitutional financial gimmicks are available too.
Instead, Democrats seem to be preparing to get pantsed.“We'll see where this comes out,” one anonymous Democratic lawmaker told the Washington Post before the tentative agreement was announced, “but by definition we're only measuring success on how much we lost.”