Regarding the debt ceiling, the hysterical headlines about default and an economic apocalypse are silly because the Treasury Department surely will “prioritize” if Republicans and Democrats don’t reach an agreement.
The above clip was taken from an interview last week with the Soul of Enterprise.
I wasn’t intending to write about this topic, but it’s getting a lot of attention now that the deadline is approaching.
If you want to understand the real issue, there is an excellent column in the Wall Street Journal by former Senator Phil Gramm and his long-time aide, Mike Solon.
They explain that the fight is between House Republicans, who want domestic discretionary spending to grow at a slower rate and Democrats in the Senate and White House who want it to grow at a faster rate.
Here’s some of what they wrote.
Of the $5 trillion of stimulus payments between 2020 and 2022, some $362 billion has yet to be spent. The House debt-limit bill proposes to claw back $30 billion—or some 8% of the unspent balance. Only in Mr. Biden’s White House and Mr. Schumer’s Senate Democratic Caucus could such a modest proposal be considered extreme. …The most recent CBO estimate projects that fiscal 2024 discretionary spending will clock in at $1.864 trillion—a 10% real increase from the pre-pandemic estimate. …This growth in nondefense discretionary spending is the post-pandemic bow wave that Mr. McCarthy’s debt-limit plan seeks to mitigate. Even if the House GOP’s proposed reductions in discretionary-spending growth took effect, total discretionary spending would still be 2.4% more in inflation-adjusted dollars than the CBO’s 2020 projection for fiscal 2024. …A clean debt-ceiling hike would give us more government spending, and the House GOP’s proposal would allow more private spending. Only in Washington is that a hard choice.
Needless to say, I disagree with both sides. There should be deep and genuine cuts in domestic discretionary spending.
But a slower increase is better than a faster increase. And I reckon any support for fiscal restraint by Republicans is welcome after the reckless profligacy of the Trump years.
The bottom line is that fights over the debt limit are messy, but if we actually got some good policy reforms, such battles could save us from something very bad in the future.
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Image credit: Andy Withers | CC BY-NC-ND 2.0.
