On Winners, Losers, and the Debt Ceiling
Horse race coverage in all the things.
Earlier in the week I noticed this piece by David Leonhardt at the NYT with the following headline question, The House Passed the Bill. Who Won? The question itself typifies a lot of the coverage I have seen on the debt ceiling debate and is maddeningly (IMHO) simplistic and all-too bothsidesy.
First, and foremost, I will answer the question by stating that we all won, because a major (and unnecessary) economic crisis has been averted and the price for its avoidance was not high. I think we all won as well because, despite a broader context of political dysfunction, this process was, at the end of the day, relatively normal.
Before (probably too late!) anybody gets upset and goes to the comments to accuse me of not being sufficiently outraged about hostage-taking and the absurdity of the debt limit, let me calm the waters a tad. I find the debt limit structure that we have in the US to be utterly absurd. Indeed, it is an example of American exceptionalism that we should not be proud of in the least.* And I agree that it is ridiculous and irresponsible (and also exceptional is the bad connotation of the word) to use this pivot point to literally threaten the global economy.
Having said that, I was pleasantly surprised that the deal that has emerged consisted largely of things that were relatively mundane in the grand scheme of things.
As such, if we have to play winners and losers, the winners are the world economy (and by extension the US economy), Biden, the Democrats, and Kevin McCarthy. The losers are the Freedom Caucus. And yes, there are some benefits cuts that will hurt vulnerable Americans.
Let me return to Leonhardt, under the heading “How Biden Lost.”
This background helps explain why Biden and his aides insisted — publicly and privately — that they would not negotiate over increasing the debt ceiling. Doing so, they explained, would encourage future ransom demands when the country again approached its debt limit. Congress should pass a straightforward increase to the limit, White House officials said, and Biden would then be happy to negotiate over the federal budget.
Instead, they abandoned this position and started negotiating with Republicans over the debt ceiling.
So, he lost because he had to negotiate after saying he wouldn’t? I have seen some version of this assertion several times and every time I think: stating that they wouldn’t negotiate was a negotiation strategy!
How can this not be obvious?
I mean, yes, the preferred Democratic position was a clean bill that raised the debt limit without conditions (and, for kicks, a pony and an ice cream cone). But given the realities of divided government and the stating starting point for House Republicans, this was never going to happen (but rumor has it Biden can get an ice cream cone without Congressional approval, so there’s that).
I mean, did anyone actually think that the Biden administration would literally not talk to House leadership at all?
Indeed, the degree to which the administration won (to stick with the theme) was knowing exactly what they were doing. See another NYT piece: Biden’s Debt-Deal Strategy: Win in the Fine Print.
The way administration officials see it, the full final agreement’s spending cuts are nothing worse than they would have expected in regular appropriations bills passed by a divided Congress. They agreed to structure the cuts so they appeared to save $1.5 trillion over a decade in the eyes of the nonpartisan Congressional Budget Office. But thanks to the side deals — including some accounting tricks — White House officials estimate that the actual cuts could total as little as $136 billion over the two enforceable years of the spending caps that are central to the agreement.
I think we should stress “nothing worse than they would have expected in regular appropriations bills passed by a divided Congress.” If that is the case, and it very much seems to be, then the administration won, hands down.
I will say that McCarthy is a winner here in the sense that he was able to come across as more Speaker-like than many thought would be the case and he helped avert a major economic crisis.
While I am on the subject of poor descriptions of this process, I agree with this piece from TPM: The False Equivalence Between The ‘Far Right’ And The ‘Hard Left’. There has been a narrative about how both parties have an equally frustrated set of extremists. But this narrative ignores several facts. The first is that the extreme wing of the GOP did, in fact, seem willing to tank the global economy. Moreover, is the responsibility of the majority party to run the chamber, and the luxury of the minority party to vote against measures for signaling purposes. But as I noted the night of vote in the House, there was a distinct difference between the way the right wing of the GOP voted versus the progressives in the Democratic Party.
A lot more can be said about this topic, but we simply need better political analysis in the American press. At a minimum, they need to stop making everything into a horse race.
*As the BBC noted recently (What Americans can learn from Denmark on handling debt ceiling crisis) the only other country with a similar mechanism is Denmark, and they handle it rather differently.
“It’s there so that the government cannot just write a blank cheque,” said Las Olsen, chief economist at Danske Bank.
Though the American and Danish laws appear similar, they work rather differently.
“[Danish] politicians consider it to be more of a formality. It’s not a political issue,” Mr Olsen said.
“They [parliament] have already passed all the laws requiring spending and they have also passed the laws about how much tax to collect,” he added.
“So it would be a little strange not to allow the government to borrow the difference.”