Thoughts on Debt Ceiling Deal
Dear Mainer,
It’s been almost two months since my first letter to you. I had hoped that my second letter would be about a different topic, but the debate in Washington about the debt ceiling and budget has consumed all of the oxygen on Capitol Hill, so I’m writing to you about this again today. I don’t have much time before the vote on the debt ceiling in just a few hours, so I recommend that you re-read my first letter or read it for the first time as a baseline for following along with this one.
When all is said and done, more will be said than done.
Maine State Senator John Patrick told me that in politics, “when all is said and done, more will be said than done.” In my final analysis of this debt ceiling fight of 2023, I’d say that’s a pretty accurate statement. The House GOP has spent five months beating the drum for massive spending reductions and threatening to lead the nation into default on our debt if they didn’t get them. Meanwhile, President Biden and many other Democrats have insisted – despite Americans voting for a divided government –they wouldn’t negotiate about whether or not America will pay its bills. Together they have put on quite a show of brinkmanship and partisan politics, but it’s been the kind of play I hate, and I don’t think I’m alone in that feeling.
When it’s all said and done, the House of Representatives will approve a bipartisan agreement to lift the debt ceiling – a good thing for the country because a default would damage our economy severely. Unsurprisingly, both the President and Speaker McCarthy are claiming they won this fight. The President says he didn’t negotiate on the debt ceiling, but he did, in fact, negotiate in order to pass this bill. And the Speaker claims this bill delivers “the biggest cut in American history,” but in reality, it doesn’t.
What will this bill do?
If you were to read the many statements that have been and will be put forth by members of Congress, watch the coverage on FOX or MSNBC, and listen to the analyses of the political punditry, you might get dizzy from all the spin. I want to try and boil this down into something more simple for you to consider.
The deal President Biden and Speaker McCarthy reached does a few things that are good for the country and a few things that are bad, depending on how you look at them and what is most important to you. I’ll tell you what I think.
First, this deal avoids a default, and that is important.
Second, after unraveling all of the accounting tricks, budget gimmicks, and sidebar agreements, this bill barely reduces spending in Fiscal Year 2024 and will more likely than not result in a modest increase in spending. I’m not ideologically opposed to more spending if the money is well spent, but it’s not a great outcome in this case because Congress should focus on reducing its budget deficit in real dollars, especially after all the money that was spent responding to the COVID-19 pandemic. Reducing spending right now would have the added benefit of helping to combat inflation which remains too high.
Third, when you take into account the Congressional Budget Office’s (CBO) long-term projections, this bill will slow the growth of our budget deficit by about a trillion or more, which includes reducing the amount of interest we will pay servicing the federal debt. That is a good thing, but it doesn’t go nearly far enough.
Fourth, this bill cuts resources given to the IRS to enforce tax compliance on the rich over the next decade and instead pours that money into government spending today. This is a typical Washington deal that results in terrible fiscal policy.
Fifth, this bill adds new work requirements for those looking to receive SNAP and TANF welfare benefits. The expansion of work requirements for these programs was a top GOP priority and I think the President should have gotten more in return for this. For example, maybe Congress should take a look at wealthy people who don’t work for a paycheck but instead live on earnings from investments and require them to work or volunteer in order to qualify for some of the tax write-offs Congress gives them.
Sixth, this bill makes some good changes to federal permitting laws, which should help speed up the process for new energy projects, and that is a good thing. It also approves the Mountain Valley Pipeline project, which will carry more natural gas to market – a good thing for the country since it will increase our energy independence and security at a time when energy prices are high, especially with Russia’s ongoing war of aggression on Ukraine.
How will I vote?
I will vote for this deal. Here’s why: a default on our debt would be ruinous for our economy. The agreement also slows the projected growth of the budget deficit, which is progress in the right direction. I believe the permitting reforms for energy projects will help to strengthen American energy security and move us closer to energy independence. I wish this deal was more straightforward and guaranteed a real dollar reduction in Fiscal Year 2024 spending. In my first letter, I laid out a potential agreement that would have reduced spending by $17 billion without any budget gimmicks. My plan also called for more taxes on the rich, not less. But, in this instance, I’ll support this deal because avoiding a default is the only responsible course of action. I think the President could have driven a harder bargain that resulted in a better set of fiscal policies to put the country on a surer path toward fiscal stability. In fairness, any effort to tax the rich faces an uphill battle against an entrenched political establishment that prefers the status quo, but also, at the end of the day, his priority appears to have been to preserve as much of the spending gains from his first two budgets as possible. Through that lens, he got the better end of this deal than Speaker McCarthy, but I still don’t think it’s ideal for the country.
Ultimately, I don’t think this partisan standoff was necessary. Most of the political professionals in Congress think the only way to play the Washington game is to play it like it’s a blood match. Call me crazy, but I believe a different approach to politics that’s more collaborative and less combative is actually possible. As I pointed out in my first letter: a negotiation on the debt ceiling and government spending has been a foregone conclusion since last November’s election. The country would have been better served if Congress had skipped the political fight and just gotten to work on an agreement.
The country doesn’t need more divisive politics and gridlock in Congress – it needs less of both. So, in summary: the path chosen by political leaders led to a manufactured crisis that will be averted with a lukewarm deal. In this case, truly, far more was said than done.