President Joe Biden and Barely Speaker Kevin McCarthy are set to meet Wednesday, a meeting that is not going to be a debt ceiling negotiation. Biden made that very clear Monday, telling CNN that his message on that is simple: “show me your budget and I’ll show you mine.”
To reinforce that, White House advisers Brian Deese, director of the National Economic Council, and Shalanda Young, director of the Office of Management and Budget, released a memo Tuesday to “interested parties.” There are two questions Biden will pose at the meeting, Deese and Young write: “Will the Speaker commit to the bedrock principle that the United States will never default on its financial obligation,” and “When will Speaker McCarthy and House Republicans release their Budget?”
“Any serious conversation about economic and fiscal policy needs to start with a clear understanding of the participants’ goals and proposals,” Deese and Young conclude. “Speaker McCarthy and his Caucus need to transparently lay out to the American people their fiscal and economic proposals in the normal budget process.”
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They backed Biden’s position up in the memo, saying that the White House will release its budget proposal to Congress on March 9. “The budget will show how the President plans to invest in American, continue to lower costs for families, protect and strengthen Social Security and Medicare, and reduce the deficit—with tables and numbers shown exactly how his economic and fiscal policies add up to achieve these goals.”
Well that’s a fun little escalation since the GOP House has been notorious for releasing plans that simply don’t add up. What they want from McCarthy is their 2024 budget blueprint that has numbers. “So far,” they write ”House Republicans have offered up detailed plans to increase the deficit with tax policies that would benefit the wealthiest Americans. … [I]n seeking their majority this fall and doing the first few weeks of holding it, House Republicans have already voted on, supported, or proposed numerous ideas that would increase the debit by trillions of dollars over the next decade.”
McCarthy replied with all the arrogance and bluster of someone dense enough to believe that he has actual power that it didn’t take 15 votes and capitulation to a bunch of maniacs for him to get the title.
But back to the first question on the White House memo, because right now it’s key: whether McCarthy will commit to avoiding a default on federal debt. In fact, instead of working on a budget, Republicans are still working on a default plan.
Read that again. They are planning for a default.
They don’t see default as a thing that has to be avoided. They are ready to go there to force their will. The House GOP has an ally in Sen. Rick Scott, who is apparently still trying to wrest control over there from Minority Leader Mitch McConnell. He has a bill requiring the government to continue to make payments on Treasury bonds, Social Security benefits, military salaries, and veterans benefits in a breach. He told Semafor that his bill would “ensure the U.S. ‘takes care of its core obligations’ while giving lawmakers the ‘limited time they may need to solve the problems before us.’”
This is the “debt prioritization” scheme that they floated back in 2011, when a number of Republicans and the Treasury determined that that is a thing that just can’t happen. “After looking at it, we came to the conclusion in the McConnell operation this doesn’t work—and there are essentially some political downsides to it,” Rohit Kumar, who for McConnell during the 2011 and 2013 fights, told Semafor.
Moody’s Analytics is warning that even if some obligations like Social Security were met, so much more would cease to function in the safety net: food assistance, Medicaid, housing support. The resolution “hit to the economy as these government spending cuts cascade through the economy would be overwhelming,” Moody’s said.
Beyond that, there’s basic logistics. The technical capacity for the government to reconfigure software to pick and choose what payments are made and cut those checks simply isn’t there. “They receive millions of invoices every week to produce millions of payments and they’re generally paid sequentially and they can’t be categorized very easily into Social Security gets paid, [Temporary Assistance for Needy Families] doesn’t get paid,” economist Brian Riedl said. “They’re just not programmed to do that.” Reidl worked for Sen. Rob Portman in the previous rounds, and studied the proposal then.
It also will look really bad, Riedl pointed out. “Chinese bondholders get paid before school lunches. Chinese bondholders get paid before border security,” Riedl said. “The attack ads write themselves.”
That’s going to make a lot of House Republicans who aren’t maniacs fretful, and McCarthy can’t afford to lose any of them. Even he should be smart enough to realize he is going into this process with a very weak hand.