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FINANCE

Debt Ceiling: What did Biden say about the Republicans’ proposals as the deadline approaches?

Fingers are being pointed, and both sides are saying that negotiations over the debt ceiling are moving backward. What has President Biden about the status of talks with the GOP?

Update:
Fingers are being pointed, and both sides are saying that negoications over the debt ceiling are moving backward. What has President Biden about the status of talks with the GOP?
POOLvia REUTERS

President Biden is returning to Washington to resume negotiations over the debt ceiling, which could be reached as soon as 1 June. The national debt ceiling is a limit on the amount of money the US Treasury Department can borrow to pay the government’s bills for spending that has already been approved. A default would be catastrophic for the domestic and global economy, upending financial markets, ripping hundreds of thousands from the labor force, and leaving many seniors and economically vulnerable households without federal pensions or assistance payments.

Yesterday, President Biden told the press in Tokyo that his team was waiting to hear back on a counter-proposal made by the White House after they were delivered a bill from Republicans that, they felt, was nowhere close to what the two sides “had agreed or discussed.

Speaker McCarthy says spending cuts are non-negotiable

Republicans want to cut spending, and that principle is the foundation of their proposal to the White House to reach an agreement over the debt ceiling.

The House of Representatives passed the “Limit, Save, Grow” Act in late April on partisan lines, and many of the proposals made to the White House are measures included in the legislation. This bill would decrease federal spending by repealing green energy tax credits, many of which were passed under the Inflation Reduction Act last year, and changing the permitting process for new energy projects to boost oil and gas production in the United States. As for cuts to social spending, the Republican bill, which received no support from Democrats, “expands work requirements for the Supplemental Nutrition Assistance Program (SNAP) and other programs, and nullifies regulations for the cancellation of federal student loan debt.

What the president has told congressional Republicans is that he will not sign a bill that alters the renewable energy tax credits and incentives passed under the Inflation Reduction Act or that implements work requirements that would have a “significant impact.” The nullification of student debt cancellation is also a red line for the White House.

The political divide: National debt as a spending problem versus a revenue problem

For Speaker McCarthy and the Republicans in Washington, the ballooning national debt is not a problem of revanue but of overspending. And this perfectly encapsulates the political divide.

As much, Republicans, and some more conservative Democrats, believe that increasing taxes on corporations that are raking in record profits, closing tax loopholes exploited by the super-rich, and going after tax evasion at the highest income levels, would be ineffective as measures to reduce the national debt. For that reason, when the GOP controlled both chambers of Congress, they passed the 2017 Tax Cuts and Jobs Act, which reduced the corporate tax rate and implemented temporary tax cuts for many households nationwide. But the potential loss of revenue generated by these tax cuts is often left out of McCarthy’s discourse on the national debt. Another factor that is often neglected is the fact that from 2019 to 2020, during the pandemic, and under President Trump’s watch, the national debt grew twenty-two percent.

YearDebtPercent Change
2010$13,562 trillion
2011$14,790 trillion+9%
2012$16,066 trillion+8.6%
2013$16,738 trillion+4.1%
2014$17,824 trillion+6.4%
2015$18,151 trillion+1.8%
2016$19,573 trillion+7.8%
2017$20,245 trillion+3.4%
2018$21,516 trillion+6.2%
2019$22,719 trillion+5.5%
2020$27,748 trillion+22%
2021$29,617 trillion+7.2%
2022$30.824 trillion+4%

On Saturday, White House Communications Director Ben LaBolt made clear the position of President Biden is that “any serious budget negotiation must include discussion both of spending and of revenues, but Republicans have refused to discuss revenue.” LaBolt added that the federal deficit (i.e., the gap between federal spending and federal revenue) has fallen by $1.7 trillion since President Biden took office. The additional government support needed during the pandemic helps to explain the substantial rise in the debt under President Trump, but LaBolt also pointed out that the tax cuts passed in 2017 cost the US taxpayer $2.2 trillion.

Both sides note backsliding in the negotiations

While the economy edges closer to catastrophe, finger pointing, Washington’s favorite activity, is alive and well.

This weekend President Biden accused Republicans of sending over a proposal that was not reflective of the commitment to bipartisanship. “We are willing to cut spending, as well as raise revenue, so people start paying their fair share,” said the president from Japan.

Speaker McCarthy tweeted that the White House was to blame for the stalling of negotiations and claimed that the president was cowering to the demands of a “socialist wing of the Democratic Party.” Socialist fear mongering is as close as Speaker McCarthy can come to equating the extremists of his party with progressives in the Democratic caucus.

To the dismay of many progressive members of the Democratic Party, the White House has said that they are open to cutting spending. A group of Senators, the majority of which are not socialists, have encouraged the White House to prepare for the possibility of using the Fourteenth Amendment of the US Constitution to unilaterally increase the debt ceiling. The attacks from the Speaker are a way to obfuscate the views held by the his own caucus, some of which are unwilling to agree to any increase in the debt ceiling.