Amid a rapidly approaching debt ceiling deadline and a continued standoff between Democrats and Republicans, it may be hard to see how this crisis ends.
Republicans believe (correctly) that holding the debt ceiling hostage gives them more leverage to win spending cuts from Biden. Democrats believe (correctly) that this is dangerous and irresponsible behavior that risks economic devastation, and that rewarding it with policy concessions would lead to more such behavior.
Just how much trouble you think we’re in depends on just how pragmatic — and tethered to reality — you think each side is.
The question about Republicans is pretty simple: Are the adults in charge?
Put it another way: Is the party controlled by extremists willing to burn down the country’s credit rating if they can’t force Democrats into unthinkable concessions? Or are they taking a tough negotiating position but likely to agree to some reasonable compromise with Democrats in the end?
There’s a question about Democrats too: Will they conclude that they probably do have to give up something to free the hostage?
That is: Will Biden climb down from his “no negotiations” position soon? Or are too many in the party truly dug into the position that any debt ceiling negotiations are immoral and dangerous, clinging to the hope that Republicans will cave with no concessions? (Many liberal commentators hope Biden will take the debt limit off the table entirely by using his executive power in some way, but administration officials have publicly dismissed such ideas.)
The debt ceiling discourse is a bit confusing because it isn’t just about the debt ceiling. As my colleague Dylan Matthews recently explained, what Republicans actually want to negotiate over is government spending levels. And Democrats will definitely have to deal with the GOP-controlled House to get government funding bills passed through Congress — if they don’t, the government shuts down after September 30. That would be true even if there was no debt ceiling fight at all.
President Biden’s current position is that he is happy to negotiate with Republicans on government spending, but not on the debt ceiling. That may be hair-splitting. The question is whether he will demand the debt ceiling be taken off the table entirely before spending talks begin. If he doesn’t, then negotiations are on, and the real question is whether the two sides can find a mutually acceptable compromise on spending.
Only then will we learn whether the adults are in fact in charge of the GOP.
What a deal would theoretically entail
If you talk privately to informed, reasonable people on this topic, they see a pretty plausible outcome where a spending deal could be reached.
It starts with a number. The centerpiece of negotiations will be how much the government should allot to discretionary spending, a category of spending that excludes entitlement programs like Social Security, Medicare, Medicaid, and certain other mandatory spending allotments.
Biden’s budget plan proposed $1.695 trillion in discretionary spending for fiscal year 2024. The bill that House Republicans just passed proposed $1.471 trillion.
To state the extremely obvious, a final deal would fall somewhere in between those numbers. (For comparison, last year’s level was $1.6 trillion.)
Of course, Democrats argue that Republicans’ number is appallingly low. David Reich of the Center on Budget and Policy Priorities writes that, if defense and veterans’ programs are protected from cuts (as Republicans want), the GOP bill would end up cutting the rest of discretionary spending by 33 percent in 2024 — a massive cut.
Democrats will not agree to anything remotely this extreme, so Republicans will have to move up their number quite a bit. But the GOP likely won’t accept much — if any — discretionary spending increases over last year’s level. They’ll also likely be adamantly opposed to any tax increases.
There’s also the question of future years’ spending levels. The last big debt ceiling deal, in 2011, set spending caps lasting 10 years. The House GOP bill proposes doing that again, with only 1 percent increases in discretionary spending each year.
That would seem to mean enormous cuts lasting far into the future, since that wouldn’t keep up with inflation or population growth — though it’s unclear future Congresses would abide by these spending caps (they were regularly overridden over the last decade). Democrats will likely push for a shorter timespan with bigger spending increases, though it may be in both parties interest to cut a deal that would last past the 2024 election.
The House GOP bill also included several policy changes Democrats really do not like. The bill would roll back Biden’s increased IRS funding, block his student loan relief program, repeal the clean energy tax breaks passed in the Inflation Reduction Act, add work requirements for many Medicaid and SNAP beneficiaries, boost fossil fuel production via permitting reform, and rescind unspent Covid-19 relief money.
Most of those ideas seem dead on arrival. Perhaps Democrats could stomach very limited or scaled-back concessions on some of them, but the GOP shouldn’t expect much. One big exception is permitting reform — there has been interest from Democrats in striking a bipartisan deal there, though it’s unclear whether it will be ready by the debt ceiling deadline.
But the feasible deal would likely mainly center on setting discretionary spending somewhere close to the current level — forgoing most or all of the typical yearly increase — in a way that lets Republicans argue they won serious cuts and lets Democrats argue they avoided devastating cuts. (Depending on where you set the baseline, whether you adjust for inflation and population growth, and what happens with defense versus non-defense funding, it would likely be possible to argue it both ways.)
Why getting to that deal might be agony
The biggest question is whether enough House Republicans will be able to recognize a realistic and reasonable compromise, or whether they’ll just keep fantasizing about driving an unrealistically hard bargain where they force Democrats to give in on topics where Democrats are adamantly against giving in.
During the last GOP House majority, which lasted from 2011 to 2018, we repeatedly saw a dynamic where GOP leaders would try to cut a spending deal with Democrats, and hardline conservatives would recoil, arguing it wasn’t good enough. And even when leaders like Speaker John Boehner put out their own plan with the intention of unifying the party, they’d often fail to get the votes for it.
When Kevin McCarthy struggled for days to lock down enough hardline GOP votes to become Speaker of the House in January, it looked like we could be heading for a repeat of that dynamic — utter Republican disarray, with anti-spending hardliners so far out on a limb that it would be impossible for McCarthy to get anything through the chamber.
Yet McCarthy has managed to keep both the House and Senate GOP almost entirely united around his strategy so far. The House GOP passed his plan last week, and Senate Republicans are deferring to him — arguing that Biden needs to come to the table and cut a deal.
The anti-spending faction is, for now, on the team, and so are the moderates. (That’s why House Democrats’ hope to force a “clean” debt limit increase via a discharge petition is likely doomed — they’d need Republican moderates to join them, but those moderates haven’t split from McCarthy.)
But how will the Freedom Caucus types react when a deal inevitably falls far short of conservatives’ wildest dreams? Will McCarthy manage to bring them along and convince them it’s the best they could have gotten, or will they revolt and use procedural tactics to try to oust him from the speakership?
That’s where we again return to the question of who’s really in charge of the GOP. If the reasonable people are in charge and this is just a hardball negotiation with the goal of getting to yes in the end, then we’ll avoid disaster. If ideology, enmity, and wishful thinking about total victory carry the day, we won’t. Place your bets.