Barely Speaker Kevin McCarthy announced in a floor speech Wednesday afternoon that the long-promised House Republican debt ceiling/budget cuts bill was finally ready, a plan he knows will be rejected by the White House and Senate even if he does manage to cobble together 218 votes within his own fractious caucus to pass it. McCarthy also set a deadline to have a vote on that bill by the end of next week, which is just six work days away.
The debt ceiling is the congressionally imposed limit on how much the government can borrow to continue to pay already obligated debts–money Congress has already appropriated. Those debts include things like paying for people in the military, Social Security and other federal pensions, and payments on foreign debt. The federal government needs to borrow money to pay its bills when its ongoing operations can’t be funded by tax and other federal revenues alone.
McCarthy’s plan reveals just how much this is about harming President Joe Biden’s reelection prospects and how little it is about the debt ceiling, setting a realistic budget, or actually doing anything about the deficit. The first clue is that it would put the next action on the debt ceiling smack dab in the middle of the 2024 election campaign. The bill would increase the debt ceiling by $1.5 trillion, but also says the ceiling is lifted until March 31. Whichever comes first–the $1.5 trillion limit or our getting to the end of March–that’s when it has to be acted on again. Either way, that would put the next fight over the debt ceiling in the middle of Biden’s reelection campaign.
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The second clue is the $4.5 trillion in cuts he says the bill includes. He outlined the same kind of cruel cuts he had already talked about, which a number of Republicans have already rejected. Without scoring from the Congressional Budget Office, that $4.5 trillion number is unconfirmed. But it’s big and it’s drastic.
Economists have warned that the cuts McCarthy and his team have been proposing would cause severe economic damage, even assuming that the worst didn’t happen and they didn’t let the nation go into default. The "dramatic reduction in government spending" Republicans are pushing could trigger "a recession in 2024, costing the economy 2.6 million jobs at the worst of the downturn and pushing unemployment to a peak of near 6%," Moody’s economists have warned.
So Republicans could force an economic disaster on Biden’s watch either way if they cause a debt ceiling crash, or if they force their budget cuts through. It’s a win-win for the Republicans in their nihilistic thinking.
The statutory limit set by Congress was actually reached back in January when Treasury Secretary Janet Yellen informed Congress that the department was going to start taking “extraordinary measures” to keep making debt payments. Those measures were expected to last for anywhere from six to nine months, but they have an expiration date depending on any emergency or unexpected spending that arises and how much revenue is brought in this spring in taxes.
Potentially lower tax returns could move that deadline up into the first few weeks of June, Goldman Sachs economists warned Tuesday. “The greatest source of uncertainty regarding the deadline is April tax receipts, which we have expected to be weak as a result of reduced capital gains-related taxes," the Goldman Sachs team said. They said that as of April 14, tax revenues were 40% lower than the same month last year. That’s a significantly larger decrease than they predicted previously, when they estimated an August deadline.
So, yes, there’s some urgency here. Which might be part of what’s behind McCarthy’s extremely optimistic goal of having the bill pass by the end of the next week with 218 Republican votes. He’s not going to find any Democrats willing to help him, and he’s already got both the Freedom Caucus and the bipartisan Problem Solvers Caucus asserting their power to withhold votes.
The second group will likely fold pretty quickly, but if the Freedom Caucus doesn’t get their way, McCarthy’s plans will fail. If the Freedom Caucus does get their way, however, he could lose the support of some of the swing-state freshmen Republicans.
Now would be a really good time for the White House to be coming up with the best way possible for Biden to use his executive authority to solve the problem.
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America could learn a lot from how other countries elect their leaders! Political science professor Matthew Shugart joins us on this week's episode of The Downballot to explain how a variety of electoral systems around the world operate, as well as his thoughts on which might work well here—and actually improve our democracy. Shugart gets into the weeds on proportional voting, single transferable vote, "decoy lists," and much more. If those terms are new to you, you'll definitely want to listen!