The Debt Ceiling Debate Is About More Than Debt
The Republican's plan to raise the nation's borrowing limit focuses more on energy policy than reducing debt.
WASHINGTON - Speaker Kevin McCarthy, of California, has said repeatedly that he, along with his fellow House Republicans, are refusing the raise the borrowing limit for America, and putting it at risk, in order to force an accounting on America's debt.
He said that the debt of America is a ticking bomb, which will explode if we don't take responsible, serious action.
McCarthy's bill, which he introduced on Wednesday, would change the trajectory of the country's debt only modestly. The bill also has a second major objective that is not related to debt. It is designed to undermine President Biden's clean energy and climate agenda, and increase American fossil fuel production.
The Republicans will vote on the legislation next week to force Biden to negotiate a debt limit increase. At present, it is capped at 31.4 trillion dollars. The federal government, which borrows large sums to pay its bills, is expected to run short of cash by June if the cap is not lifted.
Over half of the 320-page legislative text is a repeat of a Republican energy bill passed earlier this summer, which was intended to accelerate leasing and permits for oil and natural gas drilling. Republicans claim that the bill will boost the economy and increase revenue for the federal Government, but the Congressional Budget Office predicted it would result in a slight revenue loss.
The Republican plan gives high priority to the removal of clean energy incentives included in Biden's climate, health and taxes law. This legislation, also known as the Inflation Reduction Act (IRA), included tax credits and provisions to encourage electric vehicle sales and advanced battery production. It also encouraged utility upgrades, energy efficiency, and various other energy-saving efforts.
The proposal includes provisions that will reduce government deficits and spending, in particular by limiting the growth of certain federal spending categories from levels reached in 2022.
The bill would clawback some of the money that was not spent on Covid and impose work requirements which could reduce federal spending for food and Medicaid. The bill would stop Mr. Biden from imposing his proposal to forgive student loans worth hundreds of billions and to lower the payments of low-income graduates.
According to the Committee for a Responsible Federal Budget, Washington, this could reduce deficits up to $4 trillion in 10 years. Actual numbers could be lower; legislators could decide to ignore the spending caps in the future, just as they did in the past.
Even if all the estimated savings were realized, the country would still be left with a total debt in ten years that was greater than the output of the economy. Mr. McCarthy and Republicans have often called this level a crisis.
If fully implemented, the Republican plan will reduce this ratio (also known as debt to G.D.P. If fully implemented, the Republican plan is estimated to reduce this ratio -- known as debt-to-G.D.P. Biden's budget, however, which includes spending on education and child care, and raises billions in taxes for corporations and the wealthy, would result in a reduction of about six percentage points.
These reductions are far from the promises made by Republicans after they won control of the House last November to balance the budget within 10 years. This lowering of expectations is partially the result of Republican leaders denying any cuts to rapidly rising costs of Social Security and Medicare in response to an onslaught from Mr. Biden.
It is also because party leaders are unwilling or unable, to repeal the majority of new spending programs that Mr. Biden has signed into law during the first two years under his presidency.
McCarthy, at the New York Stock Exchange, accused President Obama and his party on Monday of adding "$6 trillion" to the nation's debt, ignoring the bipartisan backing for most of the expenditures Mr. Biden signed into law.
Speaker's plan would effectively rollback one large bipartisan spending measure, signed by Mr. Biden at the end 2022 for funding the government this year. The Republican bill does not repeal the debt-generating spending approved by Mr. Biden, including the trillions of dollars spent on semiconductor manufacturing, health services for veterans exposed toxic burn pits, and infrastructure upgrades like bridges, water pipelines, and broadband.
Congress could reduce some of this spending by working within the proposed caps. However, much of it has already been spent or is exempt. The Republicans have blamed Mr. Biden's $1.9 trillion economic assistance plan signed in March 2020 for high inflation. But the majority of that money has already been spent.
By cutting the energy subsidies in that bill, this plan directly targets the climate bill, health bill and tax bill passed by Democrats along party lines over last summer. The plan would also cancel the additional enforcement dollars sent by the law to the Internal Revenue Service in order to crackdown on wealthy tax cheats. According to the Congressional Budget Office, this change would cost government tax revenues of about $100 billion.
Together, these efforts reduced deficits by just over $100 billion. This suggests that debt levels were not the primary factor in targeting these provisions. The next 200 pages of the bill show what it is in reality: a sustained effort to shift federal support from low-emissions energy to fossil fuels. This includes mandating new oil leasing on federal land and reducing obstacles to the construction new pipelines.
Republicans claim that these efforts will save consumers money on gasoline and heating. Democrats claim they will halt Mr. Biden’s efforts to boost domestic manufacturing and combat climate change.
The Democratic Chairman of the Budget Committee, Senator Sheldon Whitehouse, said that the plan would cost Americans trillions of dollars in climate damage. The plan would also shrink our economy because it would disinvest in technologies of the future.
Republicans are presenting their fossil fuel initiatives as a way to solve a alleged production crisis in the United States. "I spent the past two years working with other sides of the aisle and watching them take this country apart in terms of our natural resources," said Representative Jerry Carl, Alabama, last month, before voting to approve the energy bill, which is now part of the debt ceiling legislation.
Government statistics paint a more positive picture of the industry. Under Mr. Biden, oil production in the United States is almost back to its previous record levels. Energy Department predicts that it will break records in the coming year, with Texas and New Mexico leading the way. Natural gas production is at an all-time high.
White House officials say that Republicans risk a catastrophic default by demanding an increase in the borrowing limit. Karine Jean Pierre, White House Press Secretary, told reporters that the only way to achieve a genuine budget negotiation is for House Republicans not to threaten defaults, especially when it comes the economy.
McCarthy has presented his demands as an integrated package for reorienting economic policy. In his Wall Street speech, he mentioned energy only in passing.
Fiscal policy and debt were the issue he referred to as a crisis, and the reason he refused to raise borrowing limits without conditions. He said that debt limit negotiations are an opportunity to examine the nation's finances.