At the beginning of our latest debt ceiling debacle, President Biden and his fellow Democrats said that there would be no negotiation. Biden essentially said that repaying the nation’s debts was sacrosanct; refusing to raise the debt limit would cause default and batter the nation’s credit rating; Republicans raised it multiple times for the prior Republican President without incident and Democrats cast supporting votes back then to ensure that the financial health of the country was not harmed. He claimed that he was willing to discuss budget items afterwards but he demanded passage of a debt ceiling increase without budgetary preconditions.
We are a week away from the nation defaulting on its debt and Biden is in the midst of the latest round of unsuccessful negotiations with House Speaker, Kevin McCarthy to get the debt ceiling raised. What happened?! This article pretty much sums it up:
https://www.vox.com/politics/2023/5/22/23732761/debt-ceiling-limit-biden-mccarthy-negotiations
However, there is something else that the above article does not mention: Biden’s miscalculation of Republicans eagerness to gamble with other people’s wellbeing, including their own constituents, to further their own ends. Many seniors, disabled folks and veterans vote Republican. Even though Republicans vowed not to cut Social Security, Medicaid or Veterans funding in future budgets, failure to pass the debt ceiling increase puts existing payments to those groups at risk. Payment could be delayed or there could be none at all when Treasury discovers the well completely dry. Despite the fact that a frozen debt limit and resulting default would hurt many of their own voters, Republicans still chose to play chicken with the debt ceiling and take the chance the Democrats would blink.
Why would they take such a chance? They’ve done it in the past and in nearly every case Democrats have blinked, either out of fear of being blamed for any fallout or the inability to stomach harming their own voters. Having a heart isn’t generally a bad thing, it just puts you at a disadvantage when dealing with an opponent who dismisses people’s potential suffering, starvation or inability to get medical treatment as acceptable collateral damage to ensure they get their policies passed. How could Republicans get away with such a thing? Why don’t Republican constituents see their own representatives are endangering the country’s economy, as well as that of the rest of the world, in addition to potentially interrupting the flow of benefits they receive? Republicans in Congress have perfected blaming all unbalanced government spending on Democrats. They call them “tax and spend liberals” and repeatedly lay the fault of all the country’s debt at the feet of Democrats.
To be fair, Democrats do like larger government and will spend on government programs. The parties differ, in that, Democrats will raise tax revenue to pay for program costs, often looking to raise more funds from the richest among us. Republicans, conversely, like to pay for government programs with tax cuts. Wait, what? How do you pay for spending by taking in less money? The short answer: you don’t. This ridiculous “save our victimized rich people” scam has been running since President Ronald Reagan. It was his administration that claimed they could work a miracle called supply side, i.e., “trickle-down” economics, where you send more money to the owners of capital via tax rate cuts, instead of taxing it to pay for government services. This was pitched under the ruse of lowering taxes for everyone, but the lion’s share of tax reduction went to the wealthy, with lower and middle-income people seeing only mild tax relief to increase their take home pay to make a few more fast-food trips a year. This fable also claims that when rich people get so much money it is practically bursting from every orifice, out of their magnanimity, they’ll decide to hire lots more people. This hiring will fuel the economy and all of those newly minted workers, hired because rich people had so much money they were dying to share, will earn income and their wages will be taxed, more than replacing the revenues initially lost from the tax cuts. In practice, this fairy tale does not work, the prince never arrives and the maiden stays asleep. Businesses hire more people because they cannot keep up with the demand for their products and services with current staff levels, not because they looked at their stacks of bullion and thought, “Yeah, that’s probably enough. I should go hire a lot of people now, regardless of my company’s current demand.” Can greater wealth be used to make business improvements, invest in capital expenditures and build more staff? Yes, but it is generally in response to the higher demands from customers. The spending generated from consumers with considerably smaller tax cuts doesn’t maintain increased business activity enough to make those investments or hires necessary.
President Reagan, despite his VP, George H. W. Bush, derisively referring to his plan as “voodoo economics” when they ran as opponents in the primary, drastically cut taxes. He eventually rolled some of that tax cutting back when later deficit projections showed they were unsustainable. No matter; even with the later adjustment, Reagan’s administration never passed a balanced budget and every year racked up deficits. Just like today, defense spending increased under his watch, there were occasional threats and some cuts to social spending but never enough to pay for his tax cuts. How did he make up the difference? Borrowing. Enter explosive debt and debt service from the higher interest rate environment then in effect to fight inflation during his presidency.
Fast forward to Son of a Bush, President George W. Bush, aka Bush 43. Bush’s father raised tax rates in 1990 as the 41st President, after swearing as a candidate he wouldn’t. Eventually, Bush 41 succumbed to the siren song of basic math and realized that his predecessor’s tax cuts would never balance. This helped to kill his reelection bid, as well as a younger, sax-playing Democratic opponent named Clinton out of Arkansas who won the White House in 1992. Clinton kept those higher tax rates, went on to build a surplus after two-terms and it was promptly incinerated by his successor. Bush 43 introduced two rounds of ‘economy boosting’ tax cuts, in 2001 and 2003 that, just as Reagan claimed before him, would pay for themselves. These cuts were on top of two concurrent overseas wars. The effects? You can take a gander at that link below whenever you’re ready. TL:DR version? Budget busting deficit explosion, with increasing debt. Like Reagan before him, Bush 43 never passed a balanced budget in 8 years.
https://www.cbpp.org/research/federal-tax/the-legacy-of-the-2001-and-2003-bush-tax-cuts
Beneficiaries? I wish I could say it was me.
https://itep.org/federal-tax-cuts-in-the-bush-obama-and-trump-years/
Why all this ancient history? Because it brings us to today’s debt ceiling fight. After the tax reductions of 2001 and 2003, then-candidate Obama vowed to undo those cuts when he ran in 2008. After being elected President, he was unsuccessful in reversing them. Facing a Republican congressional majority after 2010, he left nearly all of those cuts in place with only a slight income change in one of the upper brackets to show for it. Obama, also incapable of passing a balanced budget, left with deficits. The continuation of the inherited tax cuts, bailout funding for the 2008 financial crisis, myriad spending to boost the economy, reduce unemployment and the move to include war spending, previously excluded from the Pentagon budget by being requisitioned in a series of supplemental funding requests, put his 8 years of debt at anywhere from $3 - 9T, depending on methodology.
https://www.thebalancemoney.com/national-debt-under-obama-3306293
Enter Trump. He shocked the world, beat Hillary Rodham Clinton and as soon as his chair began to warm, he sought tax cuts, despite the fact that the economy was already growing and didn’t need further business stimulus. Again, he and the Republicans claimed that tax cuts would pay for themselves and said the tax code would be simplified so much that a person could file on an index card. We still file using big books with lots of codes and guidance. Returns still use whole sheets of paper but that wasn’t the biggest disappointment. The CBO found this:
https://www.politico.com/story/2018/02/28/tax-cuts-trump-gop-analysis-430781
The final count of additional debt from “paid for” tax cuts during the four years under Trump? $7.8T impact over ten years, with most of the benefit again being siphoned to the wealthiest of us. As for Trump, like Obama before him (all together now!) he never passed a balanced budget in any of his four years. I wonder who else was a signatory and supporter of those tax cuts?
Anyone recognize the guy in the red circle? Looks just like the one who refuses to authorize raising the debt limit to pay for the debt his favorite tax cuts continue to run up unless those cuts are made permanent. He flatly refuses to raise tax rates on that most oppressed class in our nation, the wealthiest .1% and .01% of us, to try and close the budget gap. He has vowed not to cut the largest programs, Social Security, Medicaid or defense, so he intends to find that savings elsewhere. Where? Discretionary spending. Those programs include, veteran’s health care, child care, food programs, medical research, Pell grants for college, environmental protection, drug and safety inspections, rollbacks of funding for IRS enforcement agents to look at the complicated tax forms of businesses and wealthy individuals to ensure accuracy and compliance, repeals of funding from the Inflation Reduction Act that is putting shovels into the ground and people to work nationwide, including in red districts. There are more items not listed in this post. McCarthy would rather decimate these programs, using the nation’s credit rating as a ransomed prisoner, than raise the debt limit or upper income tax rates.
What was Biden’s mistake? In my opinion, not pointing out that Republicans and their trickle-down wishful budgeting are behind this latest surge through the current debt ceiling. Instead of insisting that he should get a clean debt ceiling raise because his predecessor did, he should have said something else. I imagine it could have been the following, in front of live cameras. “Kevin, the majority of the latest debt surge is from covering the shortfall from your 2017 tax cuts. We all know that when you borrow, you have to pay it back. Now, don’t shrink from the debts you ran up, endanger our country, harm its financial strength and the financial security of her people, not to mention the economic strength of international allies who bought our debt. Be responsible, tell Representatives Boebert, Gaetz and Greene to stop screaming and throwing poop, raise the debt ceiling and let’s discuss budget priorities responsibly, without threatening seniors, families and veterans.” Unfortunately, this ship has probably sailed and unless something miraculous happens, there is a greater likelihood that money gets pulled from SNAP, EPA and cancer research budgets to get the debt ceiling raised, which is tragic.
This is a good piece. My comment; Biden and his team, as well as Dems in general are not good at messaging. That being said, the deal is okay; he didn’t give up much compared to the disaster of a default; Biden is the grown up here. He had to negotiate with the GOP, many of whom would gladly burn it all down.