House Republicans plan another debt ceiling showdown to force massive budget cuts

Republicans are hoping to use a potential majority in the House of Representatives next year to force massive cuts to the federal budget, especially to safety net programs like Social Security, Medicare, and Medicaid. To do this, they say they will use must-pass increases to the nation’s debt limit as leverage to get what they want, even though similar gambits actually cost the country billions of dollars during President Barack Obama’s administration.

The debt limit, the maximum amount the government may legally borrow, is currently at about $31.4 trillion and will likely be reached in 2023. Congress will have to vote to raise, suspend, or eliminate that cap to avoid what economists say would be catastrophic default on obligations.

Aaron Fritschner, communications director and deputy chief of staff to Democratic Rep. Don Beyer of Virginia, the chair of the congressional Joint Economic Committee, tweeted Tuesday, “House Republicans saying out loud that holding the debt limit hostage to demands for cuts to Social Security and Medicare is a ‘top priority.'”

Bloomberg Government reported on Tuesday that Reps. Jodey Arrington (R-TX), Buddy Carter (R-GA), Jason Smith (R-MO), and Lloyd Smucker (R-PA), each a potential chair of the House Budget Committee should the Republicans regain control of the House in the 2022 midterm elections, said that they hoped to force major spending cuts and would use the upcoming debt-limit deadline to force Democrats to go along.

The report quoted Smith, currently the ranking member of the panel, as saying, “The debt limit is clearly one of those tools that Republicans — that a Republican-controlled Congress — will use to make sure that we do everything we can to make this economy strong.”

“Our main focus has got to be on nondiscretionary — it’s got to be on entitlements,” Carter said. Social Security and Medicare are currently entitlement programs.

Arrington agreed: “Republicans have a list of eligibility reforms, and we don’t like the tax increases.”

Smucker said he wanted to see “some sort of means-testing potentially” for the programs, which provide retirement income and health insurance to older Americans.

Experts say that cuts to safety net programs would harm millions of citizens and that means-testing could make the programs less effective.

“From an effectiveness standpoint, we have a lot of evidence that more universal programs are better for a host of reasons including for helping very low-income people,” Shawn Fremstad, senior policy fellow at the Center for Economic and Policy Research, told Vox in October 2021. “It has to do with not being so burdensome, not having so much paperwork to do. There’s also a way in which more universal programs are less divisive politically.”

Spokespeople for the lawmakers did not immediately respond to a request for comment for this story.

But using the debt limit as a tool fits a recent pattern of Republicans demanding massive budget cuts and railing against rising debt — but only when a Democrat is in the White House.

Since President Joe Biden took office, GOP lawmakers have complained about the national debt — currently about $31 trillion — and blamed Democrats for the entire figure.

But congressional Republicans backed trillions of dollars’ worth of new spending under Republican President Donald Trump, along with a large tax cut that was projected to add another roughly $1.9 trillion in debt over a decade.

Increasing the ceiling does not increase spending. As the Treasury Department explains, it merely allows the U.S. government to pay for the “existing legal obligations that Congresses and presidents of both parties have made in the past” and to pay the interest on the existing debt.

Under Obama, a group of far-right “tea party” Republicans won House seats on a promise to cut spending. In 2011, they used the threat of a debt default to force Obama and Democrats to accept automatic spending cuts through that year’s Budget Control Act.

But even the specter of default rattled credit markets and caused the Standard & Poor’s rating agency to downgrade the nation’s credit rating.

According to a 2012 report by the nonpartisan General Accountability Office, the impact was costly. It “estimated that delays in raising the debt limit in 2011 led to an increase in Treasury’s borrowing costs of about $1.3 billion in fiscal year 2011. However, this does not account for the multiyear effects on increased costs for Treasury securities that will remain outstanding after fiscal year 2011.”

In a September 2021 blog post arguing for the abolishment of the debt ceiling, Josh Bivens, research director for the progressive Economic Policy Institute, noted that it “[h]as been used time and time again to enforce misguided austerity policies” without providing a useful measure of the country’s financial situation, pointing out:

[People] tend to miss what was by far the greatest damage done by the 2011 debt ceiling episode: the passage of the Budget Control Act (BCA) … The BCA’s caps on federal spending explain a large part of why this spending in the aftermath of the Great Recession was the slowest in history following any recession (or at least since the Great Depression). … If this spending had instead followed the normal post-recession path, then a return to pre-recession unemployment rates would’ve happened 5–6 years before it finally did in 2017.

Seth Hanlon, a senior fellow on the progressive Center for American Progress’ tax and budget policy team, told the American Independent Foundation on Tuesday that the same thing could happen again in 2023:

MAGA Republicans have proven willing to do just about everything to gain power and advance their extreme agenda. So it is totally foreseeable that they would attempt to take the country’s credit standing as a political hostage in order to go after Social Security, Medicare, and Medicaid. Those programs are so vital and so popular that leading House Republicans apparently think they’ll only succeed in their goal of gutting them by resorting to such an extreme and dangerous gambit.

The ironic part is that if House Republicans instigate a debt limit crisis like they did in 2011, it would not only risk catastrophic economic damage, but it would likely result in higher interest costs for the federal government — in other words, higher deficits.

Under Trump, Republicans in Congress did not force debt limit showdowns, supporting bipartisan increases and a temporary suspension of the cap.

But under Biden, they have reverted to their old strategies. Even after Moody’s Analytics warned in September 2021 that “a default would be a catastrophic blow to the nascent economic recovery from the COVID-19 pandemic” that might cost 6 million jobs, slash household wealth by $15 trillion, and cause lasting damage to the nation’s credit rating, House and Senate Republicans almost unanimously opposed a debt limit increase last December.

House and Senate Democrats passed the Inflation Reduction Act in August, cutting the federal budget deficit by hundreds of billions of dollars. Every Republican in Congress voted no.

Published with permission of The American Independent Foundation.