The writer is director of economic policy research at the American Enterprise Institute
The U.S. is due to breach its borrowing ceiling as early as next week, but Republicans and Democrats have yet to reach an agreement on raising the debt ceiling and averting economic and financial disaster.
The country has been brought to the brink of disaster as structural problems of the economic and political systems collide. A deal to raise the debt ceiling and cut some categories of federal spending would resolve the immediate crisis, but not these worsening problems.
what are these? Start with economics. There is no question that the national debt is on an unsustainable trajectory. The nonpartisan Congressional Budget Office projects that federal debt held by the public will grow from 98% of annual economic output in 2023 to 118% in 2033 and 195% in 2053.
But the debt ceiling bill pass House Republicans in April cut parts of the budget that were already putting downward pressure on the debt. So-called “discretionary” spending — which includes education, transportation, housing assistance and public health — is expected to decline by nearly 1 percentage point as a percentage of annual GDP over the next three decades.
Meanwhile, Social Security and Medicare spending is projected to rise from 8.2 percent of annual GDP in 2023 to 10.1 percent in 2033 and 11.9 percent in 2053. These programs—along with ever-increasing debt interest payments—are responsible for setting the nation’s debt on an unsustainable path. But there was bipartisan agreement not to cut their spending.
On the political front, the normalization of resistance to default and the diminishing influence of leaders over party members is a looming disaster. Even if President Joe Biden and House Speaker Kevin McCarthy succeed this time, it’s a powder keg for future debt-ceiling negotiations.
Hardline Freedom Caucus transmit signal It has very limited willingness to compromise on any provision in the House bill. Key House Republican Chip Roy memorandum He told his colleagues this week that every provision in the bill is “vital and no provision should be dropped just to seek a ‘deal'”.
Convincing hardliners and chaotic surrogates in the House to back a compromise will be a tall order for McCarthy. His position is at stake. Any member can force a vote to remove him from office.
Can Biden field enough Democrats to support a deal strong enough for House Republicans that McCarthy can bring it to his members? To illustrate the challenge, consider the more stringent job requirements of safety net programs.These are part of the House bill that McCarthy has known as They are the “red lines” in negotiations.
biden suggestion He may be willing to moderately enforce some requirements for able-bodied adults with no dependents.but progressive democrats have statement it’s out of the question. Can Biden find enough House Democrats? as 100 Might it be necessary – to support a compromise that strengthens these demands when the progressive wing of the party is so opposed?
The main problem is not Biden and McCarthy. It is structural. Extremist forces in both parties have increased their relative influence over centrists, partly reflecting changes in the electorate itself. Politicians facing re-election want to appear ideologically pure to avoid challenging their party’s nomination. They are less concerned with appealing to general election voters with laws that reflect bipartisan compromise. This, in turn, attracts more extreme candidates, exacerbating the problem and further weakening the leader’s grip on party members.
Assuming the current crisis passes, how should Congress move forward? Address structural issues. The debt ceiling is less of an issue if the national debt is on a downward trajectory. That would require increasing projected tax revenues and reducing future spending on Social Security and Medicare.
Legislation in this area should also recognize that politics are more extreme and politicians are more unruly. In the future, appropriate increases in the debt ceiling should automatically be tied to any laws that increase the budget deficit.
Implementing these structural reforms will be a daunting task. But the alternative could leave America as a deadbeat nation unable to pay its bills on time, languishing under the weight of debt. America’s position as a global economic and political leader would be significantly weakened — bad for the country and the world.