As of this writing, the U.S. House of Representatives still has no official Speaker after Rep. Kevin McCarthy was ousted by his own party two weeks ago. While the House’s inability to govern itself is a sad reflection of the current state of our democracy, there is a silver lining in Republicans’ embarrassingly tumultuous infighting: they are telling on themselves and making it painfully clear to the rest of the country that they are incapable of governing.
But if you’ve been paying any attention to the way Republicans have handled issues related to the national debt over the last few months, you probably already knew this. Republicans never cease to complain about the debt, which now stands at $33.65 trillion; they have held the economy hostage and now even fired their own leader over their demands to reduce spending. But in almost the same breath they have pursued policies which have actually exploded the deficit. For this week’s Closer Look, we want to highlight Republicans’ antics over the national debt – and also give you a better guide as to how you should really be thinking about this big question in our economy.
If you remember, back in May of this year the U.S. came perilously close to defaulting on our national debt. We surpassed the debt ceiling on January 19, after which Treasury Secretary Janet Yellen warned that the U.S. would run out of money to pay its bills in early June. To avoid a catastrophic default which could crash the entire global economy, the obvious thing to do was pass a bill to raise the debt ceiling (which the U.S. had previously done no fewer than 78 times). Congress did ultimately pass a bill to suspend the debt ceiling through January 1, 2025 – but only after Republicans played a dangerous game with the economy for weeks on end in order to extract spending cuts to shrink the national debt in that same bill.
What were those spending cuts? Among other things, the “savings” came from new work requirements on older recipients of the Supplemental Nutrition Assistance Program and the Temporary Assistance for Needy Families Program and a clawback of $21.4 billion of the $80 billion in funding that the IRS received as part of the Inflation Reduction Act. In the end, Republicans did shave down spending, but only by hurting low-income seniors and further hampering the IRS’s ability to go after wealthy tax cheats – a move which, ironically enough, will actually end up increasing the national debt.
Not even four months later, Republicans pulled the same charade over the national debt in budget appropriation negotiations that would keep the government open and fully funded before a September 30 deadline. Congress did ultimately pass a bipartisan bill at the eleventh hour to keep the government funded through mid-November – which means that we’ll probably revisit the issue in a few weeks – but passing the temporary measure caused a Republican revolt, and ultimately the downfall of ex-Speaker McCarthy.
Far-right Republicans, including former President Donald Trump, were actively calling for the government to be shut down in negotiations in a ploy to get Democrats to give in to their spending cut demands. Many of these spending cuts were targeted at vital services for the poor. To be clear, government shutdowns are always economically disastrous; one week alone of a shutdown would cost the U.S. travel economy $1 billion and would furlough tens of thousands of federal workers and contractors, many of whom would not be guaranteed backpay. But Republicans never seem to care. When then-Speaker McCarthy bypassed far-right Republicans and forged a bipartisan coalition to avoid a shutdown, perhaps the first and only responsible thing he did as Speaker, they retaliated by firing him from the Speakership.
It’s important to fully grasp this. Republicans decided to remove their leader because he would not go along with their ploy to shut down the government – a move which would have materially hurt tens of thousands, while triggering a nationwide economic meltdown – to score political points in the form of spending cuts – a move which, again, would have hurt tens of thousands. It’s twisted and shocking, but sadly not surprising for the modern-day GOP.
Republicans take unique joy in disingenuously sounding the alarm over our national debt (but only when there is a Democratic president). When Rep. Jim Jordan announced his candidacy for the Speakership, he said, “We continue to spend too much money…we must get our fiscal house in order and reduce spending so that we can leave more to the next generation than a crushing deficit.” It’s easy to see how this argument might resonate with casual observers. $33.65 trillion is admittedly a big number. But Jordan and his Republican colleagues are not giving Americans a complete financial picture.
Republicans like Jordan fail to understand that the budget of the federal government is unlike a household budget in America. Because the federal government issues the currency that we use, it will, by definition, never run out of money to pay its bills back and honor its debts. In theory, we could pay off our debt in seconds. (This idea was floated back in May during the debt ceiling crisis, with some activists calling on the government to mint a $1 trillion coin and deposit it at the Federal Reserve.)
Debts and deficits at the federal level actually have the potential to be positive influences on the economy, if money is being spent in ways that fuel sustainable economic growth. The historical record shows that, incredibly, it’s actually when the budget is balanced and the debt is reduced or paid down that the economy does poorly. In 1996, Frederick Thayer of the University of Pittsburgh found that each of the six significant economic depressions that the United States has experienced (at his writing) “was preceded by a sustained period of budget balancing.”
No one – including the Patriotic Millionaires – is suggesting that we should have no concern about the national debt whatsoever, or spend irresponsibly. It’s true that overspending can overheat the economy and trigger inflation, which is problematic. What we are suggesting is that, contrary to popular wisdom, the national debt is not an inherently bad thing, and therefore Republicans’ constant demands for spending cuts are both disingenuous and dangerous.
These are exactly the arguments that our Chair, Morris Pearl, and our Senior Tax Policy Advisor, Bob Lord, made in a recent op-ed in The Hill, which you can read HERE. It’s also the point that Morris made in a recent Letter to the Editor at The Washington Post, which you can read HERE.
If for argument’s sake we granted the idea that the national debt was an inherently bad thing, you’d never know it by the way Republicans spend when they control Congress. After throwing temper tantrums about the debt when Democrats are in control, they will turn around and cavalierly pass bills that explode it with trillions in tax cuts for the ultra wealthy and corporations. You’d be forgiven, for example, for being confused about why Jordan and his Republican colleagues voted for the 2017 GOP Tax Cuts and Jobs Act, which spiked our national debt, if they’re so concerned about spending. Now, they support a bill that would make provisions of that infamous bill permanent and, in the process, add $3.5 trillion to the deficit through 2033. So much for fiscal responsibility!
Republicans’ blatant hypocrisy underscores the fact that the modern-day GOP stands for nothing. Their only objective is to sow chaos. As the leading candidate in the 2024 Republican Presidential primary, former President Trump has offered no real, substantive, concrete platform. Rep. Jordan is no better. Former House Speaker John Boehner, a fellow Ohioan, has described him as a “legislative terrorist” who is hellbent on “tearing things apart – never building anything, never putting anything together.”
Republicans’ inability to govern and penchant for chaos has already done enough damage to our economy and our social fabric. We must ensure that they’re not rewarded for it at the ballot box in 2024.