House Speaker Kevin McCarthy said some confusing things — and then some revealing things — this week about what is shaping up to be the biggest economic policy battle of the year ahead.
The statement came on Wednesday, when the California Republican appeared on Sean Hanith‘s nightly Fox News broadcast and got a question about the debt ceiling, which is the legal limit on how much money the federal government can borrow.
The administration will formally end the restrictions in the next few days, Treasury Secretary Janet Yellen said Friday. And when his department is ready to take the series “extraordinary step“which will allow the government to borrow for a few more months, then it will run out of options – most likely, from the sounds of it, by the end of the summer.
At that point, if Congress doesn’t pass a bill that raises the debt ceiling, the federal government must stop borrowing. And if the government can’t borrow any more money, it won’t be able to pay all of its bills, which could have all kinds of consequences — like no benefit checks for veterans and Social Security recipients, or a shutdown of the U.S. government. credit on which the global economy depends.
It all sounds pretty bad – and it will! Therefore, for most of US history, lawmakers in either party have not threatened to block an increase in the debt ceiling. But during Obama’s presidency, the Republicans began to hold the debt ceiling hostage, refusing to vote for legislation to raise it until Barack Obama and the Democrats would agree to cut spending.
Now Republicans are threatening to do the same thing again. On Hannity, McCarthy defended this type of brinkmanship with an analogy: “If you have a child and you give them a credit card, and they keep restricting it, do you just increase the limit or change their behavior?”
Here we come to McCarthy’s first misleading claim.
Refusing to raise the debt limit means refusing to pay the bills the federal government has already incurred. This does not prevent your child from buying a new scooter. He refused to pay for the smartphone he got last month.
In the same segment, McCarthy offered more justification for Republicans’ posturing — because Republicans like him think they should raise the debt ceiling, even if it’s extreme.
Here we come to a statement that is not only misleading, but also revealing.
History Tells A Different Story From Kevin McCarthy
As McCarthy explained, “one of the biggest threats to this country is our debt,” noting that the ratio of public debt to gross domestic product – a metric widely used to measure the level of federal government debt – has not been high. since World War II. McCarthy blamed the debt crisis on “runaway spending” and placed the blame on Democrats.
It is true that the debt-to-GDP ratio has not been this high since World War II (or at any other time in US history). But at the time it was too high because the US was facing a once-in-a-lifetime crisis that required big, sudden, one-time spending. This is exactly what happened because of COVID-19, and why the deficit (which leads to debt) suddenly increased.
That’s not the full story, to be clear. Even before the pandemic, respected analysts of various political backgrounds were concerned about rising debt-to-GDP.
But is it fair to put Democrats, like McCarthy and his allies?
Take a look in how the deficit has changed in this century: They have risen in the Republican president and fallen in their Democratic counterparts. (This chart from MSNBC’s Steve Benen illustrates the story well.)
Or look closer at the signature legislative initiative of this president during the short period when the party also controlled Congress.
George W. Bush’s tax cuts from 2001 and 2003 did nothing to balance revenue or spending. Because of that, they represent more than $1.5 trillion of lost revenue over ten years, officials at the time predicted. As for Donald Trump’s tax cuts, which also have no offsets, the official projections say nearly $2 trillion in lost revenue.
By contrast, official estimates of the Affordable Care Act, aka “Obamacare,” suggest reduce the deficit on the net because it includes some new taxes and cuts to other programs. They go for it Inflation Reduction Actwhich Democrats passed and Biden signed last year.
This does not mean that Republicans are responsible for the higher deficit. The Bush tax cuts won some Democratic votes, for example. So did the money for the war in Iraq, which, although temporary, had a significant fiscal impact.
But if one party is more responsible than the other, it’s hard to make a credible case that it’s the Democrats.
Republicans Vote Like They Care About Spending
When McCarthy said “debt” was a big problem, he spent a lot of time in the interview decrying special spending. Here, finally, we get to the part where McCarthy’s quotes unfold.
It’s not the debt per se that bothers him or his GOP allies. It spends on programs and taxes that fund them.
McCarthy and the Republicans had their reasons. They think that spending hurts the economy, that taxes take money unfairly from people who earn it, and so on. And it’s sometimes an effective political slogan, especially when it attacks spending in the abstract as wasteful or sending taxpayers’ money to undeserving beneficiaries.
But actually cutting spending in a way that will make a meaningful, long-term impact on the deficit and debt will certainly come after the big three entitlement programs: Social Security, Medicare and Medicaid.
It is very popular because many Americans are now or will depend on them for their livelihood and medical care. The attack on the program – just like the Bush effort privatization of Social Securityor Trump’s proposed cuts to Medicaid as part of Obamacare repeal – has been a political disaster for Republicans.
That did not scare some House Republicans – among them, Jodey Arrington from Texas. He chairs the budget committee and says he favors raising the eligibility age for Social Security.
“There are a lot of difficult decisions for all of us,” Arrington told HuffPost. Arthur Delaney and Jonathan Nicholson. “The rubber will meet the road with real decisions about bending the curve on spending and program reform.”
McCarthy tried to be more careful, perhaps because he was more aware of the toxicity of such politics. At a news conference Friday, he insisted Republicans will “protect” Medicare and Social Security.
However, as Arthur and Jonathan point out, McCarthy was not specific about his intentions. Likewise, it may be an open moment.