By Paul Krugman
Opinion Columnist
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Nobody knows for sure what will happen in the midterm elections. But if Republicans take one or both houses of Congress, the most important question will be one that is getting hardly any public attention: What will the Biden administration do when the G.O.P. threatens to blow up the world economy by refusing to raise the debt limit?
In particular, will Democrats be prepared to take the extraordinary actions the situation will demand, doing whatever it takes to avoid being blackmailed?
Notice that I said “when,” not “if.” After Republicans took the House in 2010, they quickly weaponized the debt limit against the Obama administration, using it to extract spending cuts they couldn’t have achieved through normal legislative means. And that was a pre-MAGA G.O.P., one that for the most part didn’t deny the legitimacy of the president and didn’t make excuses for violent insurrections.
In fact, I wonder whether Republicans will even seriously try to extract concessions this time around, as opposed to creating chaos for its own sake.
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Notice also that I said “blow up the world economy,” not merely hamstring the U.S. government. For the consequences of forcing a federal debt default, which is what refusing to raise the limit would do, would extend far beyond the operations of the federal government itself.
Let’s back up and talk about why any of this is an issue. U.S. law, for historical reasons, requires in effect that Congress vote on the budget twice. First, senators and representatives enact legislation that sets tax rates and authorizes spending. This legislation ends up determining the federal budget balance. But if we end up running a deficit, Congress must vote a second time, to authorize borrowing to cover that deficit.
It’s not clear that this procedure ever made sense. In any case, in modern times the debt limit empowers cowardly posturing: Politicians can claim to be for fiscal responsibility, refusing to vote for a higher debt limit, without specifying how the budget should be balanced.
And no, “we should eliminate wasteful spending” isn’t an honest answer. The federal government is basically a giant insurance company with an army: Spending is dominated by Social Security, Medicare, Medicaid and the military, and voters want to maintain all of these programs. There’s surely waste in the government, as there is in any large organization, but even if we could somehow make that waste disappear, it wouldn’t do much to reduce the deficit.
Someone seriously worried about the deficit could call for higher taxes. After all, the U.S. tax burden is low compared with other wealthy countries. But Republicans aren’t going to go there.
Where will they go? There’s lots of evidence that Republicans will, if they can, try to use the debt limit to extort major cuts in Social Security and Medicare. They probably couldn’t pass such cuts — which would be deeply unpopular — through the normal legislative process, and they certainly wouldn’t have enough votes to override a Biden veto. But the idea would be to force Democrats into complicity, so that the public doesn’t realize who’s responsible for the pain.
Opinion Columnist
Sign up for the Paul Krugman newsletter, for Times subscribers only. A guide to U.S. politics and the economy — from the mainstream to the wonkish. Get it in your inbox.
Nobody knows for sure what will happen in the midterm elections. But if Republicans take one or both houses of Congress, the most important question will be one that is getting hardly any public attention: What will the Biden administration do when the G.O.P. threatens to blow up the world economy by refusing to raise the debt limit?
In particular, will Democrats be prepared to take the extraordinary actions the situation will demand, doing whatever it takes to avoid being blackmailed?
Notice that I said “when,” not “if.” After Republicans took the House in 2010, they quickly weaponized the debt limit against the Obama administration, using it to extract spending cuts they couldn’t have achieved through normal legislative means. And that was a pre-MAGA G.O.P., one that for the most part didn’t deny the legitimacy of the president and didn’t make excuses for violent insurrections.
In fact, I wonder whether Republicans will even seriously try to extract concessions this time around, as opposed to creating chaos for its own sake.
Advertisement
Continue reading the main story
Notice also that I said “blow up the world economy,” not merely hamstring the U.S. government. For the consequences of forcing a federal debt default, which is what refusing to raise the limit would do, would extend far beyond the operations of the federal government itself.
Let’s back up and talk about why any of this is an issue. U.S. law, for historical reasons, requires in effect that Congress vote on the budget twice. First, senators and representatives enact legislation that sets tax rates and authorizes spending. This legislation ends up determining the federal budget balance. But if we end up running a deficit, Congress must vote a second time, to authorize borrowing to cover that deficit.
It’s not clear that this procedure ever made sense. In any case, in modern times the debt limit empowers cowardly posturing: Politicians can claim to be for fiscal responsibility, refusing to vote for a higher debt limit, without specifying how the budget should be balanced.
And no, “we should eliminate wasteful spending” isn’t an honest answer. The federal government is basically a giant insurance company with an army: Spending is dominated by Social Security, Medicare, Medicaid and the military, and voters want to maintain all of these programs. There’s surely waste in the government, as there is in any large organization, but even if we could somehow make that waste disappear, it wouldn’t do much to reduce the deficit.
Someone seriously worried about the deficit could call for higher taxes. After all, the U.S. tax burden is low compared with other wealthy countries. But Republicans aren’t going to go there.
Where will they go? There’s lots of evidence that Republicans will, if they can, try to use the debt limit to extort major cuts in Social Security and Medicare. They probably couldn’t pass such cuts — which would be deeply unpopular — through the normal legislative process, and they certainly wouldn’t have enough votes to override a Biden veto. But the idea would be to force Democrats into complicity, so that the public doesn’t realize who’s responsible for the pain.
Opinion | Preparing for Republican Debt Blackmail
Democrats should do whatever it takes to block extortion.
www.nytimes.com