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**APRIL 19, 2023**
Kuttner on TAP
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**** McCarthy's Losing Game of Debt Chicken
Everything has to break right for the hapless Speaker to pass his
budget, and even then Biden holds all the cards.
House Speaker McCarthy has reportedly assembled a budget scheme that he
plans to bring to the House floor next Wednesday. In exchange for an
increase in the debt ceiling of either $1.5 trillion or for a one-year
period (whichever comes first), McCarthy's plan is said to call for
deep cuts in previously appropriated funds for the Inflation Reduction
Act and the IRS, as well as work requirements for Medicaid and other
social programs, and a ten-year limit in federal spending increases of 1
percent per year from a 2022 base.
He may well add more demands. The specifics keep changing daily as
McCarthy tries to assemble 218 votes, with cuts and other conditions
draconian enough to attract hard-right members of his House caucus but
not so extreme that they scare off traditional Republicans or ones who
have to run in swing districts.
He has only four votes to spare and will attract no Democrats. Press
accounts keep quoting members of his caucus expressing skepticism.
McCarthy may yet pull off this part of his caper. He was willing to take
15 votes making incompatible deals in order to get elected Speaker. Even
so, getting Republicans to pass his budget, though still a long shot,
would be the easy part.
Biden, sensibly, will negotiate on none of this. Wall Street seems to
believe that one way or another a crisis of debt default will be
averted. But Wall Street has also been warning Republicans not to play
this game.
As the deadline for default approaches (supposedly seven weeks or less),
even if McCarthy manages to persuade his caucus to pass some version of
his plan, it is Republicans who will have to blink first. Their demands
are unprecedented. And should the U.S. actually default on its debt,
even for a few days, financial markets would tank and Republicans would
reap the blame.
The only person who could save McCarthy from himself is Joe Biden. If
Biden, against his own instincts and the counsel of his advisers, began
a process of trying to find some token cuts to give Republicans, that
would muddy the waters and create pressure for more cuts.
Biden fell into that trap when he was Obama's vice president and
occasional budget negotiator. The Third Way crowd will be clamoring for
such a compromise. But once bitten, twice shy. Biden, mercifully, shows
no sign of caving.
In the endgame, if Republicans want a murder-suicide pact, with the
economy as victim, Biden could well invoke Section 4 of the 14th
Amendment, which provides that the debt of the United States "shall not
be questioned." The custom of requiring separate votes to increase the
national debt only dates to 1917.
Let McCarthy and company take Biden to court. Even this Supreme Court
would think twice before ordering the United States to default on its
debt.
~ ROBERT KUTTNER
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