Never take a hostage you are not willing to shoot, according to the first rule of political bargaining. That is a piece of advice that House Republicans should think about as they get ready for a pivotal debate with President Biden over lifting the federal borrowing limit.
On Thursday, the U.S. will approach its maximum on gross federal debt of $31.4 trillion, and the Treasury is taking exceptional measures that, based on the current revenue trajectory, could prevent default until the spring. Speaker Kevin McCarthy has vowed to his constituents that he won’t propose raising the cap without President Biden making spending cuts. However, Mr. Biden claims he won’t engage in any debt ceiling negotiations.
The debt ceiling needs to be raised, hence something or someone must be sacrificed. The United States has already borrowed the money and spent it, therefore the public debt constitutes a contract. Nobody in Washington who is sensible wants to be held responsible for starting a default and the turmoil it would bring about in the bond market, therefore it is almost guaranteed that it won’t.
Republicans have every reason to wish to put an end to the recent trends of extravagant spending. Publicly held debt in the United States now amounts to almost 100% of GDP, up from 77.6% in 2018 and 39.2% in 2008, respectively. Interest on the debt will consume a growing portion of federal revenue as the cost of financing it rises quickly along with interest rates. The national defense will suffer along with other priorities.
Spendthrifts should settle their obligations, but they also need to have their credit cards restricted or cancelled so they can’t keep accruing debt. The majority in Washington has recently abandoned this sensible principle. That someone in authority wants to control it is advantageous for the nation.
The asymmetry of political forces that the House GOP must contend with is the issue. Their majority is barely five, and if Rep. George Santos is forced to quit, it will drop to four. The White House and the Senate are held by Democrats. The financial world, Wall Street as a whole, bond investors, credit rating agencies, and others will issue dire debt-limit warnings. As usual, the media will support the Democrats. GOP unity will make the vote for Speaker appear simple as political pressure increases.
In 2011, Republicans used the debt ceiling as leverage to ask Barack Obama to agree to a spending cap on discretionary spending. Outlays decreased as a percentage of GDP for several years as a result of annual caps and the possibility of automatic reductions. However, the cost was significant due to expenditure caps on both domestic social welfare and defense. As the two sides agreed to negotiate improvements, entitlements were excluded. But neither Mr. Obama nor Mr. Biden, whose obvious tactic is to paint the House GOP as MAGA fanatics, had any actual intention of doing so.
Up until Republicans started exchanging defense budget increases for social welfare increases during the late Obama and early Trump years, military readiness suffered significantly. Russia’s invasion of Ukraine, China’s threat to annex Taiwan, Iran’s progress toward developing a nuclear weapon, and the jihadists’ continued viability make the globe a more dangerous place. A sequester agreement similar to the one from 2011 would be a risky present for American foes.
Passing legislation that prioritizes tax income for debt payments as a guarantee against default is one developing GOP tactic. Additionally, it would safeguard some crucial federal programs as well as Medicare and Social Security payments. Other domestic accounts and maybe discretionary defense spending would thereafter go unmet until a debt agreement was reached. This is preferable to holding debt default as a hostage, but it still entails political risks because Democrats will point up the unfunded obligations.
To avoid appearing to seek a default, Republicans will therefore need to carefully choose their expenditure targets, articulate their objectives in straightforward terms, and then present their case to the public as a cohesive unit. The worst outcome would be if Republicans talked tough for months, but then broke apart in a rout at the end, forcing Democrats to take control of the House floor to raise the debt ceiling with nothing to show for it. Right-wing opportunists would then accuse one another of selling out despite having insisted on impossible demands.
Democrats don’t believe they need to negotiate because they anticipate this to take place. Republicans need a plan for how this fight will finish, not just how it will start, if they want to use the debt ceiling as leverage.
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