A Prospect newsletter about the debt limit
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What Happens if President Biden Caves on the Debt Ceiling?

A two-year spending cap is going to harm millions of Americans.

 

John Minchillo/AP Photo

By Ryan Cooper

**** For months, President Biden had a consistent line on
the debt ceiling: He would accept only a clean increase, without
conditions. This was the lesson from the Obama administration
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it was thought, learned at great expense when President Obama tried to
negotiate with Tea Party Republicans in 2011 to get a grand bargain to
cut the deficit. The result was the budget "sequester," which badly
eroded the federal government and elongated the agonizingly slow
economic recovery. That's why Obama stood his ground in 2013, and
Republicans-eventually-backed down
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getting essentially nothing out of the eventual debt ceiling increase.

But now all that is out the window. With the June 1 X-date approaching,
the Washington media clamoring for Biden to cave
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and administration officials working themselves into an anxious fit
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over potential executive actions to nullify the ceiling, it seems
President Dark Brandon is returning to be old Conciliatory Joe. The man
himself telegraphed this in a speech in New York last week
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that was designed to hammer Republicans over the debt ceiling, saying
"we should be cutting spending and lowering the deficit without a
needless crisis, in a responsible way."

Reuters
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and Politico
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report that the White House is preparing to offer concessions in the
form of cutting discretionary spending to the level of fiscal year 2022,
and then capping the rate of increase at 1 percent per year for an
indeterminate period, maybe two years. There would be other parts to the
compromise, including rescinding some COVID aid and some bargain on
permitting reform, but as far as spending, the discretionary caps would
be the major piece.

This is a disastrous move. Politically, it reinforces the precedent that
Republicans can extract concessions through legislative terrorism, and
by signaling weakness and timidity in the Democratic leadership, it will
further enable GOP extremism. If Republicans control either chamber of
Congress next time the ceiling is hit-a high likelihood given how bad
the Senate map is in 2024-then they're virtually certain to take the
debt ceiling hostage again.

But the practical consequences will also be terrible. We don't know
the details yet, but returning to fiscal year 2022 budget levels would
mean an immediate cut of about 13 percent
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to every government agency and program (thanks to an unusually large
spending increase in 2023 to account for economic growth, high
inflation, and a few additional programs). If defense and border cops
are exempted, then the cut will be perhaps 22 percent.

**Read all of our debt ceiling coverage here**
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Rep. Rosa DeLauro (D-CT), the ranking member on the House Appropriations
Committee, solicited estimates
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from various government departments on what that 22 percent cut would
mean. They told her that just for starters, 60,000 people would not be
able to attend college; 200,000 children would get kicked off Head
Start; 100,000 families would lose child care; and 1.2 million people
would be removed from WIC nutrition assistance.

One hundred twenty-five air traffic control towers would be shut down,
affecting one-third of airports, and no doubt worsening the chronic
snarls in American air travel. Rail safety inspections would be cut back
by 11,000 work days, meaning 30,000 miles of track going uninspected.
(More dangerous chemical spills, here we come!) Some 640,000 families
would lose rental assistance, and 430,000 more would be evicted from
Section 8 housing. And even all that isn't the whole list of carnage.

Now, Republicans have not suggested an across-the-board cut, and it's
certainly possible that some of the above priorities would be spared.
But that would only make the cuts to the programs that don't get such
treatment

**worse**, because appropriators would need to hit that overall cap
number.

Incidentally, this illustrates well the utter stupidity of Republican
budget politics. Instead of drawing up a list of priorities, calculating
how to fund them, and then writing a budget plan to fit-they neither
know nor care about any of that stuff-they just demand arbitrary and
escalating cuts to everything that isn't the troops or border police,
because that's what right-wing media says is the most conservative
thing to do.

Needless to say, there's no indication of any revenue increases being
discussed to offset this pain. Anti-tax Republicans wouldn't like
that, and in this hostage situation, you mustn't anger the guys (and
it's mostly guys) with the guns.

There may well be macroeconomic effects from this deal as well. These
cuts would suck hundreds of billions of dollars out of an economy that
is already plainly softening, thanks to high interest rates and
instability in the banking system. A ton of austerity might just be the
thing that tips America into a recession during an election year, with
Biden, a willing negotiator in this process, on the ballot.

Finally, it's not at all clear that House Republicans will actually
accept this partial ransom. Speaker of the House Kevin McCarthy just
barely managed to pass his current debt ceiling hostage note by giving
the far right everything it asked for (and then only because two
Democrats were absent from the chamber). Sure enough, several members
told Politico
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Friday that they want the spending cap to last ten years instead of two,
at a minimum. As I was writing this, others also told Politico
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they want harsh border controls as well.

From their perspective, this makes perfect sense. If Biden is too
weak-willed to stare down Republicans like Obama did in 2013, and too
chicken to mint the coin or invoke the 14th Amendment, why not demand
more concessions while he's on the ropes? Heck, why not demand the
entire ransom, including work requirements for Medicaid and gutting the
Inflation Reduction Act?

Two years of capped spending is bad enough. But it might end up being
even worse.

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