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In just over a week, Congress may voluntarily crash the American economy.
I am, of course, speaking of the debt ceiling. It's the legal limit on how much total debt the government can have outstanding. It's supremely redundant, because Congress regularly sets taxation and spending levels, and the gap between the two determines how much we'll borrow. Separately raising the cap on total borrowing amounts to letting Congress come to a fiscal decision, then drunkenly stumble back and demand a mulligan.
But it's more than that. Passing budgets requires action by Congress. Not raising the debt ceiling simply requires inaction. In a legislative system as riddled with veto points as ours, that makes the debt ceiling the perfect weapon for an intransigent minority. If they can't get the policies they want through the regular democratic give-and-take, they can get it by refusing to budge and thus threaten economic calamity.
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The final question, then, is why? The House Republicans refusing to raise the debt ceiling often couch their arguments in terms of "fiscal responsibility." But this is patent nonsense. Tax increases would be just as "fiscally responsible" as spending cuts. Instead, the demand has been to offset debt ceiling increases with spending cuts alone. They aren't using the debt ceiling to force "fiscal responsibility" — they're using it to force smaller government.
The "fiscal responsibility" trope invokes the idea that the government is just like a business or a household. But no business or household on Earth has the job of shepherding and husbanding an entire economy; none depends on the overall level of economic growth for its revenue; none has the legal ability to determine what portion its own revenue will be; and certainly none has the legal ability to create its own supply of currency. The government is a thing unto itself — a kind of pass-through point that determines the flow and direction of resources and activity throughout the economy — and it is in fact possible for the government to run, and to need to run, big deficits for very long time periods. It's also possible for the government to never pay off the debt it has accrued.
If the economy goes into recession, deficit spending can boost it back to growth. If the economy is in the doldrums, deficit spending can push up job creation until we reach full employment. But that inescapably requires "big government" — large and generous welfare programs to move money downwards and maintain aggregate demand; investment in public infrastructure to keep the economy growing; and providing everyone a decent education, decent health care, good roads, clean water, nice parks, healthy environments, safe workplaces, and all the rest.
Indeed, because the government can print its own currency, effectively buy its own debt, and thus effectively control the interest rates it must pay, inflation is the real upper limit on how far it can take this. Only if we reach full employment — when all workers can easily access a job, and employers must compete for labor by hiking wages — do government borrowing and money-printing risk overheating the economy.
And here's the key thing: Precisely because full employment forces employers into competition, driving up wages, it also drives down the share of national income going to business owners, wealth holders, and the rich. It provides everyday workers more power and say in the running of their workplaces, it downgrades the sociopolitical clout of the elite, and it flattens out inequality. If you kill big government, and you kill deficit spending, then you kill the possibility of full employment: You ensure long periods of lackluster job growth and rising inequality, and you guarantee that recessions will act as shock therapy to break up work bargaining power, throw people out of the labor force, and drive down wages.
Frankly, this is probably the point. The Republican Party has been purifying down to its older, whiter, upper class core. These are people who do not like full employment because they do not like the kind of society it creates: one in which everyone else has roughly as much power as they do — or at least enough power to contest with them over the direction of society. Obviously, in a democracy, it's almost impossible to fight that sort of egalitarianism forthrightly. But thanks to the debt ceiling, they have a backdoor route to accomplishing the same thing.
The Republican establishment is sufficiently wedded to Wall Street that they'll go along with a clean increase. Deficit spending is a flow, so if the government can't borrow any more, it can't service the debt it's already taken on. American debt is considered the safest investment in the world, and the benchmark by which much of the global financial markets operate. If America reneges on its payments, it's really anybody's guess what sort of chaos that will set off.
But more importantly, immediately cutting off all capacity to borrow will force the government to bring daily spending into line with daily revenues. That will immediately and drastically cut everything the government does: Social Security benefits, infrastructure repair, Medicare payments, Medicaid payments, welfare aid, education, public services, the works. The result will almost certainly be immediate and severe recession.
The GOP base may hate the centrist corporate sell-outs in its ranks. But its members are also positioned high enough in the U.S. socioeconomic order they'll be largely untouched by the job losses and economic upheaval. And they'll think that the less fortunate souls who are caught up in it deserve what they get.
So it shouldn't surprise us that the House GOP is having trouble coughing up with the measly 30 votes required to pass a clean increase of the debt ceiling, even with every Democrat already prepared to vote for it.
In the first debt limit fight in 2011, Republicans won a raft of spending cuts that ensured the recovery from the Great Recession was longer and more brutal than it otherwise needed to be. After that, President Obama wised up, demanding debt ceiling increases free of policy concessions, and otherwise refusing to negotiate. But each time, the number of Republicans willing to join the House Democrats in passing the measure has dwindled.
This will be the first debt ceiling hike since the 2014 mid-terms solidified the GOP's grip on both the House and Senate.
So we're about to find out just how much the Republicans hate the idea of a just and egalitarian economy.
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