The Republicans’ Unbelievable Proposal to Cut The Deficit to Zero

President Biden wants a clean increase in the debt ceiling while Republicans seek spending cuts. 

This will end the way it always does, Republicans will cave.

The Debt-Limit Time Machine

Please consider the The Debt-Limit Time Machine

As Congress prepares for another debt-limit standoff, a look into the past — at the 10 such deadlines lawmakers have confronted over the last 13 years — offers three shared truths.

The first: House Republicans, even with hearty majorities, have always needed votes from Democrats to act on the debt limit. Second: Any time House conservatives tried to unite around fiscal demands, they failed. And finally, when Democrats refused to negotiate upfront, Senate Republicans came to their rescue with a bipartisan fix in the end.

The president’s “no negotiations” playbook comes after more than a decade of hostile debt fights, during which Biden was often an influential dealmaker. When Democrats fired up bipartisan talks upfront, like in 2011, it ended in major spending cuts and economic fallout. When they wouldn’t engage from the beginning, like 2013, House Republicans eventually unraveled their own ultimatums.

One Known, Three Unknowns

• The Known: Expect a replay of 2013. Republicans will cave.
• First Unknown: Whether the House caves sooner rather than later. I suspect later. 
• Second Unknown: Whether caving in will cost Kevin McCarthy his job as Speaker of the House.
• Third Unknown: Whether or not Senate Republican get some trivial face-saving tidbit for McCarthy. And that answer may decide the second unknown.

Are there any unknown unknowns? 

History pretty much suggests that is it. In short, the House stance is unworkable, and it  will make Republicans look weak when they do cave.

What then? 

That’s the real question, and once again it does not look pretty for announced Republican positions.

Kevin McCarthy Targets Elimination of Budget Deficits in Debt-Ceiling Talks

The Wall Street Journal reports Kevin McCarthy Targets Elimination of Budget Deficits in Debt-Ceiling Talks

As discussed above, the headline is Fantasyland stuff. But what happens after the debt ceiling is raised?

Since they took control of the House last month, Republicans have been arguing that Congress should cut spending in exchange for GOP support for raising the debt limit, now at about $31.4 trillion. In an address Monday ahead of President Biden’s State of the Union address on Tuesday, Mr. McCarthy (R., Calif.) laid out the size of the cuts Republicans are seeking. 

“A responsible debt limit increase that begins to eliminate wasteful Washington spending and puts us on a path to a balanced budget is not only the right place to start, it’s the only place to start,” said Mr. McCarthy, who spoke from a hallway near the speaker’s balcony, a formal area often used for major announcements. “Now we must return Washington to a basic truth: debt matters. The debt limit is one of the most important opportunities Congress has to change course.”

I have no disagreement with that idea. But how do we get there?

Mind the Gap

The annual gap between federal spending and federal revenue was around $1.4 trillion last fiscal year. The Committee for a Responsible Federal Budget, a nonpartisan budget group, has estimated that balancing government spending and revenue over 10 years—without any new tax increases—would require cutting 25% of government spending. 

Again, I have no problem with that idea in theory. 

But is 2.5 percent a year doable? How? Not with off the table ideas coupled with the defense spending that Republicans want.

Off the Table

Mr. McCarthy reiterated he wouldn’t support cuts to Social Security and Medicare—the largest federal spending programs—and he didn’t specify a timeline for balancing the budget. But without raising taxes or cutting Social Security, Medicare or spending on veterans and defense, CRFB estimates that Congress would need to cut 85% of spending in all other categories to balance the budget in 10 years.  

Cuts to Social Security are off the table. Cuts to Medicare are off the table. Tax hikes are off the table. Presumably,  defense cuts are off the table. 

How the hell can there be any move towards cutting the deficit if all that stuff is off the table?

It’s Impossible

McCarthy cannot do what he proposes and that is even before we discuss interest on the national debt which will soar way more than what the CBO has budgeted. 

Like it or not, there needs to be serious compromises. Instead, we have more military spending, more handouts, and more energy policy madness, which translates to more inflation and more interest on the national debt.

Will McCarthy even last the year? 

If not, it will be extreme Left vs extreme Right. 

Nothing will get done, arguably not a bad thing but it would increase the likelihood of a Republican loss in 2024.

The 2024 election will decide the Left vs Right fate, but no matter who wins that battle, don’t expect any progress on the deficit until there is a major currency crisis.

The Annual Interest Rate Payment on Government Debt is $850 Billion and Rising Fast

Meanwhile, please note The Annual Interest Rate Payment on Government Debt is $850 Billion and Rising Fast

At the current pace, interest on US government debt will soon hit one trillion dollars. Yet, we have nonsensical talk of cutting the deficit, while everything is off the table. 

Good luck with that.

This post originated at MishTalk.Com.

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