Last week, after a historic five-day battle involving no fewer than 15 rounds of voting, Representative Kevin McCarthy (R-CA) was elected Speaker of the House of Representatives for the 118th Congress.
In order to win the gavel, McCarthy had to make concessions to a group of 20 far-right Republicans, the majority of whom belong to the House Freedom Caucus. We don’t know the details of many of these back-room concessions, but what we do know is trouble. After Republicans passed a package of new House rules yesterday, it became clear that they are planning to use the federal debt ceiling as leverage to obtain spending cuts to entitlement programs.
In yesterday’s package, House Republicans voted to eliminate the Gephardt rule, which previously allowed the House to avoid having to vote to raise the debt ceiling and instead let it automatically increase. Without this rule in place, Republicans can now execute their plan to demand concessions from Democrats on spending cuts to entitlement programs like Medicare and Social Security in exchange for raising the debt ceiling. It’s just as we predicted would happen in the new Congress under McCarthy’s leadership.
Economists estimate that, if Congress doesn’t act beforehand, we will likely hit the debt ceiling limit – currently $31.4 trillion – by October. With the divided Congress that we now have on our hands, a default is a very real and frightening possibility. The Republican caucus is indicating that it is willing to hold our economy hostage unless Democrats agree to massive spending cuts to vital programs that millions of Americans rely on.
Our situation is similar to the one we experienced back in 2011; Democrats and Republicans managed to avoid default, but their now infamous political to-and-fro caused the stock markets to tumble and credit agency Standard and Poor’s to historically downgrade the US’s perfect AAA credit rating to AA+. To be frank, that’s probably the best-case scenario we can hope for given the further radicalization of the House GOP caucus in the last decade.
A default on our debt would be nothing short of catastrophic. It could trigger a global financial crisis and, according to one estimate, cost as many as 6 million jobs and $15 trillion in lost household wealth in America. Needless to say, this should be avoided at all costs. But contrary to what Republicans would have you believe, we do not need to sacrifice vital social programs like Medicare and Social Security to do so. If they’re not going to eliminate the ceiling, then Congress has absolutely nothing to lose – and everything to gain – by simply raising it, just as they’ve done 78 times in the past.
We’ve said it before, and we will say it again: the fight that Republicans are waging is nothing but a smokescreen. They would have you believe that it is fiscally irresponsible to raise the debt ceiling and borrow more money without also instituting spending cuts. But the debt ceiling and federal spending are two entirely different things. Federal debt involves paying for things for which Congress has already appropriated funds. Instituting new spending cuts does quite literally nothing to stop the national debt from reaching the ceiling.
Considering that, it’s clear that the debt ceiling serves no real or practical purpose. The majority of Western countries do not have debt ceilings and manage to do just fine funding and maintaining their government services. Debt ceilings give the impression that there is a limited amount of debt that the US government can incur, but this is wrong. Because the US issues our own currency, we never have to worry about “going broke” or paying back our debts. In other words, there is no real debt ceiling to speak of in the US. The one that we have is merely an artificial barrier that serves no meaningful purpose beyond helping Republicans in their misguided political ploys.
That’s why we wanted Democrats to eliminate the debt ceiling entirely when they had total control of Congress. They had an opportunity in the lame duck session to raise or even eliminate the debt ceiling to avoid this very-predictable issue, but they missed their chance. Republicans are clearly the bad guys in this fight, but Democrats could have avoided this entirely predictable looming catastrophe, and they didn’t. At the end of the day, Democrats’ failure to act on the debt ceiling may be one of the largest political mistakes of the decade if the House Freedom Caucus gets their way.
Democrats are claiming that they’ve “learned their lesson,” from previous debt vs. spending cut fights, but their passivity on the debt ceiling in 2022 is far from reassuring. With so much on the line, the American people need an adult in the room to make sure the basics of running our government are accomplished, and that means Democrats are going to have to step up. They need to take the initiative on the fight over the debt ceiling, stand up to Republicans, and both protect entitlement programs from being needlessly run dry in a fake fight over a superficial debt limit and keep our global economy from melting down in a default.
We’d also like to hope that some House Republicans will act responsibly, but we’re not holding our breath.
