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The author is a contributing editor to the Claremont Review of Books
In Washington, a dramatic legislative week ends with a mixture of tragedy and farce. President Joe Biden’s plan to expand welfare programs and give the country a green light has progressed behind a sophisticated legislative strategy. Passed almost $ 2tn as a Covid-19 stimulus measure in March and $ 1.2 ton was packed this summer in an infrastructure bill with huge Republican support. The more controversial 3.5 tonne ‘social policy’ bill, with its green regulations and tax increases, was left until later. But this week, progressives in Biden’s own party, which contradicts the delay, threatened to sabotage the infrastructure bill in the house. Speaker Nancy Pelosi delayed the vote and jeopardized the entire Biden agenda.
The debacle is playing out against the growing fiscal uncertainty. Democrats, who hold both houses of Congress, end the fiscal year on September 30 without a budget, and scrambled to avoid a government strike. Republicans meanwhile used a powerful weapon – they refused to vote for an increase in the ‘debt ceiling’, without which the government could not borrow in mid-October. Many economists and politicians warn that the debt ceiling rubbish could cause an explosion in world credit markets – some attributing the Republican position to malice, others to madness. Ominous to the Democrats, many of the public do not see it that way.
Republicans may have cause for concern over the budget. Government debt amounts to 125 percent of GDP. But Republicans are not the avid bookkeepers they once were, and their real grievance lies elsewhere. The New York Times describes the great bill on social policy as ‘intended to shape every facet of American life’. Yet Democrats use a procedure called “reconciliation,” which circumvents the Senate’s usual rules of debate so that a party point can vote. Senate Minority Leader Mitch McConnell said if Democrats wanted to change the country on their own, they could take responsibility for it.
In the wake of Donald Trump’s embarrassing resignation, many Republicans were in a dual mood. Not anymore. Since August, Biden has twice seemed incompetent – first during the withdrawal from Afghanistan; then in his confused response to the sudden movement of tens of thousands of Haitian immigrants across the Rio Grande.
Republicans are now appealing the $ 28 million debt owed by the country to the Democrats as a frugality. Under current circumstances, this is a winning strategy. Inflation has risen. Signs of higher interest rates make the time less advantageous for expensive programs. In addition, Democrats control all three branches of government. When the Democrats used the debt ceiling in 2006 as a weapon against a well-positioned George W Bush, it was he who suffered. Today it’s Biden. According to Politico, 31 percent would blame Democrats and 20 percent Republicans in case of default.
The debt ceiling is an American peculiarity, but its roots are deep. Debt between generations has kept the drafters of the US Constitution busy. Thomas Jefferson, who wrote to James Madison of Paris two months after the fall of the Bastille, doubted that “one generation of men has the right to bind another.” It is Congress, not the President, that is constitutionally authorized to borrow in the name of the state. The antecedents of today’s debt ceilings arose during the First World War, not to enforce fiscal discipline, but rather to make a borrowing routine.
The world’s investors and macroeconomists are uncomfortable that this power is in the hands of a potentially stubborn majority. U.S. Treasury Secretary Janet Yellen said it would be “catastrophic” if the U.S. clashed with the debt ceiling. Some have urged Biden to strike a trillion-dollar platinum coin, others that he should use a tortured reading of the 14th Amendment to unilaterally raise the debt ceiling.
Republicans meanwhile think that a breach of the debt ceiling will be less threatened than experts say. In 2011, when S&P downgraded the US debt from AAA to AA +, it cost the government $ 1.3 billion in interest. It’s real money, but it’s not impressive with a Democratic spending bill designed to cost taxpayers nearly 3,000 times as much.
Voters’ grip on their economies has eased during the subprime and Covid-19 crises — especially when it comes to complex issues of budget, macroeconomics and finance. Evidence is growing, from Barack Obama’s unilateral suspension of corporate rules in the early days of its Affordable Care Act to the constant expansion of the European Central Bank’s role since the euro crisis. Elected and administrative elites seem bound by democratic constraints. . . except on really important matters. Against all odds, Republicans benefit from their guilt. Maybe voters want the question to come up.