The 2023 Debt Ceiling Crisis

[gbasden]

Major cuts aren't needed if we reset the tax rates to a reasonable level.

[Kurth]

In my eyes there are two things the Democrats need to avoid in all of this: 1. A Debt default and 2. Trump being re-elected in 2024. And I personally think that, as much as we might hate it, the reality of the situation is that the GOP has a gun to our head and Biden is doing the best that can be done in this situation.

I don’t agree with a lot of things in the original post, but this point nails it as far as the non-negotiable objectives the Dems all need to get behind. The problem is, I’m not really sure what they can do about it. I’m not confident there’s any deal the GOP will agree to because I’m not so sure they aren’t actively rooting for a default and the ensuing calamity it will bring.

[Kraken]

Major cuts aren't needed if we reset the tax rates to a reasonable level.

The GOP wants to cut the IRS's funding to collect the low taxes already owed, so good luck with that.

[waitingtoconnect]

As much as I’d love to see tax rises neither party will do those. Even MSNBC and every “left” outlet due to their ownership would critique a tax rise.

[Zarathud]

So the plan to deal with the Republicans in the House was … not to deal with the Republicans, but vote in the lame duck session. ::roll::

[malchior]

So the plan to deal with the Republicans in the House was … not to deal with the Republicans, but vote in the lame duck session. ::roll::

So on one hand you acknowledge earlier the Republicans are "crazy" but then roll your eyes at plans that don't include them. If I'm getting that right. That's a big part of the problem though. There is no reasonable deal to be made with them.

The bottom line is that many of our institutions including Congress are *broken* and we need leadership that 1) acts to protect the American people from those failures and 2) incentivizes responsible behavior to maintain enough stability to keep alive the hope of fixing it. Biden seems to live in a world where the United States isn't caught in a cascading series of failure scenarios and acts like it is 1990 instead of 2023 with an insurgent reactionary faction threatening our stability.

In any case, if we default, one of the folks directly responsible will include Biden. People mid-last year at the time were predicting the very events happening now and had detailed several paths to try to avoid it. For example, back in October as detailed at Washington Post Biden shot down an idea to get rid of the debt ceiling altogether (proposed by Yellen in 2021 which was strongly backed earlier in 2022 by Brookings Institute because they argued that the debt ceiling was becoming too big a risk to the United States. He also shot down other efforts to deal with the issue proactively. He was offered opinions from the public, from inside his administration, and from Congress. He chose his path and it's more than fair to criticize him for the results of that choice.

To put some emphasis on the information available even last year, the Washington Post piece itself accurately predicts the very situation happening now. They also note that prior to the mid-terms a "ride or die" hardline position on debt ceiling negotiations was a litmus test for Republicans in their primaries. They were telling us they were going to do what they are doing now. Biden ignored that risk in favor of crossing his arms and daring them to default. That's some pretty terrible risk management. In fact, that is partly why I call it incompetence. Maybe it was at some level a "plan" or a strategy but it was one that almost anyone with good sense could see was destined to fail if they listened to what the GOP was saying.

In any case, there has been a chorus of people all along who could see Biden was essentially allowing events to happen and have been pushing him to at least plan for the GOP going over the edge. Which is what we are now reading the administration is scrambling to do now at the 11th hour. When I see someone who works for me scrambling because they didn't prepare for the thing everyone said would happen...I tend to have doubts about their competence. And I shouldn't have to wonder about that in a President but this is what passes for "leadership" in 2023 in these United States.

[pr0ner]

As much as I’d love to see tax rises neither party will do those. Even MSNBC and every “left” outlet due to their ownership would critique a tax rise.

Taxes automatically go back up to pre-Trump levels at the end of 2025 (but with the SALT deduction cap still intact!). It's gonna be interesting to see how a Congress that can't do anything addresses that one.

[El Guapo]

As much as I’d love to see tax rises neither party will do those. Even MSNBC and every “left” outlet due to their ownership would critique a tax rise.

Taxes automatically go back up to pre-Trump levels at the end of 2025 (but with the SALT deduction cap still intact!). It's gonna be interesting to see how a Congress that can't do anything addresses that one.

Spoiler:

They won't.

[Kurth]

As much as I’d love to see tax rises neither party will do those. Even MSNBC and every “left” outlet due to their ownership would critique a tax rise.

Taxes automatically go back up to pre-Trump levels at the end of 2025 (but with the SALT deduction cap still intact!). It's gonna be interesting to see how a Congress that can't do anything addresses that one.

Spoiler:

They won't.

I hate that goddamn SALT deduction cap.

[Smoove_B]

This seems reasonable

NEW: Senior Biden admin officials & public health leaders are warning that debt ceiling negotiations around clawing back unspent Covid $ would have an unintended consequence: increasing sexually-transmitted diseases.

The potential cuts — one of the few seeming areas of agreement between House Republicans and the White House — could sap as much as $30 billion from state and local public health departments that are struggling to rebuild as Covid-19 wanes. Funding clawbacks would undermine work to slow the spread of syphilis, chlamydia, gonorrhea, HIV and hepatitis, and leave the country weaker in the face of future pandemics.

States and cities are counting on unspent Covid funds to support the ranks of local public health workers who test people for sexually transmitted infections, find and contact others who were exposed, and direct people to treatment, efforts crucial to limiting the spread of STDs.

...

Depending how much more funding is cut in the final debt ceiling deal, public health departments could be forced to lay off staff from a workforce already shrunken by pandemic burnout, affecting efforts to respond to new outbreaks of mpox in some U.S. cities, among other priorities, Harvey said.

I'm beginning to think there's an intentional effort to completely dismantled local public health function.

[Octavious]

From what I'm reading it will expire with everything else in 2025. Thankfully the companies get to keep everything they were given. Thank god for that.

https://taxfoundation.org/tax-basics/salt-deduction/


The SALT deduction is a large tax expenditure, meaning it is among the provisions in the tax code that provides a special deduction, credit, exclusion, or other tax preference that wouldn’t be included in a “normal” tax code. The Joint Committee on Taxation (JCT) estimated that the deduction for state and local taxes paid would cost the federal government $24.4 billion for 2020. If Congress does not make permanent the individual tax provisions, the SALT deduction cap of $10,000 per household will expire as scheduled after 2025.

If the Republicans are in office it probably gets at least extended. Dems in office? They are going to let it expire and we'll hear people howling how they raised taxes. They could only get the tax cuts through by raising some money to stay under certain amount of debt created. People with big tax bills helped bridge that gap. Did I mention I hate this country?

[Pyperkub]

As much as I’d love to see tax rises neither party will do those. Even MSNBC and every “left” outlet due to their ownership would critique a tax rise.

Taxes automatically go back up to pre-Trump levels at the end of 2025 (but with the SALT deduction cap still intact!). It's gonna be interesting to see how a Congress that can't do anything addresses that one.

Spoiler:

They won't.

Yeah, Obama screwed that pooch good when he failed to even let the massive high earner W. Bush tax cuts to become permanent rather than expire. Sinema yanking the hedge fund loophole closure from the Infrastructure Act even made this more probable.

[Smoove_B]

It's going great:

High-stakes talks over raising the debit limit abruptly came to a halt Friday on Capitol Hill, after Republican negotiators walked out of the room and blamed the White House for holding up discussions.

"Until people are willing to have reasonable conversations about how you can actually move forward and do the right thing, then we're not gonna sit here and talk to ourselves," Rep. Garret Graves, R-La., told reporters.

"We decided to press pause because it's just not productive," he added. Graves said he did not know if talks would resume this weekend.

This is what they collectively think, btw:

The House and Senate both kept their original plans to leave for the weekend on Thursday. The Senate is not scheduled to be back session until the last few days of May.

[Octavious]

I'm sure Biden will roll over at the last minute. So I'm not spending much time worrying about it. I think we all know that the R's will nuke us from orbit, so as there was no good preplanning there isn't much choice.

[El Guapo]

I'm sure Biden will roll over at the last minute. So I'm not spending much time worrying about it. I think we all know that the R's will nuke us from orbit, so as there was no good preplanning there isn't much choice.

Yeah, it's feeling pretty surrender-y right now. One hope is that it's not 100% clear that the Republicans are coherent and sane enough to accept a surrender. Any surrender deal may immediately become toxic by virtue of being agreed to by Biden.

[Octavious]

The party of fiscal responsibility created 8 trillion more in debt in 4 years... Lowered taxes without you know cutting anything, but it will be fine we'll make more! Until the dems are in office and then it's all scrunched up serious faces. I just don't get how we don't have anyone that can communicate how ridiculous this is. They just fumble around and take it over and over and over. Whatever...

[Zenn7]

I'm sure Biden will roll over at the last minute. So I'm not spending much time worrying about it. I think we all know that the R's will nuke us from orbit, so as there was no good preplanning there isn't much choice.

Yeah, it's feeling pretty surrender-y right now. One hope is that it's not 100% clear that the Republicans are coherent and sane enough to accept a surrender. Any surrender deal may immediately become toxic by virtue of being agreed to by Biden.

Thought that was more of a concern than a hope. Gives the "falling of the scale because we're too far" far right nuts more incentive to make it crash and burn?

[El Guapo]

I'm sure Biden will roll over at the last minute. So I'm not spending much time worrying about it. I think we all know that the R's will nuke us from orbit, so as there was no good preplanning there isn't much choice.

Yeah, it's feeling pretty surrender-y right now. One hope is that it's not 100% clear that the Republicans are coherent and sane enough to accept a surrender. Any surrender deal may immediately become toxic by virtue of being agreed to by Biden.

Thought that was more of a concern than a hope. Gives the "falling of the scale because we're too far" far right nuts more incentive to make it crash and burn?

Well, I'm thinking of it more as a hope than a concern under the assumptions that: (1) any deal would likely constitute Biden caving to GOP hostage demands; and (2) if a deal cannot be reached then Biden would likely use an executive action rather than actually default.

Since executive action is what he should do regardless, the GOP being unable to agree to a surrender deal would *probably* be a positive thing.

[malchior]

The NY Times - both sides...sure. Whatever. A rotted out institution like all the others. The whole thing talks about how independents will blame both sides. It's almost like they don't see the part where the media is responsible for misinforming people into thinking both sides are at fault. It's maddening to watch this nonsense go on.

[waitingtoconnect]

I'm sure Biden will roll over at the last minute. So I'm not spending much time worrying about it. I think we all know that the R's will nuke us from orbit, so as there was no good preplanning there isn't much choice.

The attitude is something like if Jesus won’t start the apocalypse then we better help him.

A debt default would be the worst self inflicted wound a nation has done to itself since Brexit and the war in Ukraine. An obsession with the past (your country’s dominance that no longer exists) blinded the UK and Russia to the fact you cannot come out with a win.

This would be even worse because the US would surrrender its dominant position to China and Russia for no good reason.

The democrats need to call out more aggressively that these savings would be undone in totality by the fact the republicans want to make permanent the Trump era tax cuts.

https://www.budget.senate.gov/chairman/ ... ing-to-cbo

[hepcat]

I think a lot of people (including Trump) have zero clue as to how massively bad a default would be.

[waitingtoconnect]

The NY Times - both sides...sure. Whatever. A rotted out institution like all the others. The whole thing talks about how independents will blame both sides. It's almost like they don't see the part where the media is responsible for misinforming people into thinking both sides are at fault. It's maddening to watch this nonsense go on.

Nothing sells like the Apocalypse. And a good thing too because the quarter afterward is bound to be terrible.

[Alefroth]

Biden now claiming there isn't enough time to use a unilateral measure to side-step the debt ceiling. Still hopes it can be resolved legislatively. Did he lean nothing in 8 years as Obama's VP?

[malchior]

Like I said - he appears to be incompetent. Anyone arguing against this has a long uphill climb.

[YellowKing]

People have been calling him incompetent his whole term and yet he still manages to get shit done. I'm not counting him out until we default. The guy's got decades of experience dealing with the other side of the aisle, I don't believe for a moment he's suddenly in over his head.

[Alefroth]

I want to believe, but he sure appears to be blindsided by the unwillingness of the GOP to work in good faith.

[malchior]

People have been calling him incompetent his whole term and yet he still manages to get shit done.

Incompetence isn't binary or all-encompassing. He was demonstrably incompetent handling Afghanistan. He was incompetent on planning for any response to the border situation. He is looking incompetent in this case. He was and has been fairly competent on Ukraine. The problem is that he sometimes fails badly on high impact items and that enables risks that are dire for us.

I'm not counting him out until we default. The guy's got decades of experience dealing with the other side of the aisle, I don't believe for a moment he's suddenly in over his head.

Honestly his experience is the problem. He has been part of the problem all along. IMO he is a man who sometimes is indeed crafty and has positive relationships that help but also has huge blind spots that leave him ill-equipped to deal with the current situation.

[Pyperkub]

Afghanistan was Trump's clusterfuck. Don't forget that Trump refused to give biden's transition team access to anything for over 2 months. Could they have done more? Probably, but don't forget that fixing the NATO/Ukraine mess that Trump left ( which you give him credit for), was a year long effort from the start of his Presidency - I'm happy to trade what could have been a slightly better clusterfuck in Afghanistan for avoiding a full scale war in Poland and Taiwan. The whole world should be too.

The border is what the border has been for a decade plus. It's not something the president can fix.

The debt ceiling is still in the end game, and it's still a GOP default if it happens. Biden should be and has been negotiating to see if there is a win win solution here, however unlikely given the awful state of the GOP, and Mccarthy's complete inability and incompetence at dealing with the full on nutjobs in the GOP.

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[YellowKing]

They're not going to default. This is the world's biggest game of chicken and both sides are going to play it up until the last possible second. There's too much wealth on both sides to allow the economy to be intentionally driven off a cliff.

[malchior]

Afghanistan was Trump's clusterfuck. Don't forget that Trump refused to give biden's transition team access to anything for over 2 months. Could they have done more? Probably, but don't forget that fixing the NATO/Ukraine mess that Trump left ( which you give him credit for), was a year long effort from the start of his Presidency - I'm happy to trade what could have been a slightly better clusterfuck in Afghanistan for avoiding a full scale war in Poland and Taiwan. The whole world should be too.

Trump set the stage/conditions for Afghanistan but the inspector general's report on the administrations efforts say they continued efforts known to be in trouble (e.g., reports about the Afghan army being corrupt) and then contributed materially to the fuck up by not preparing for any trouble. In the end, Biden was President and he and his team re-dropped the ball.

The border is what the border has been for a decade plus. It's not something the president can fix.

I agree he alone can't fix it. So what's his plan? What did he propose? It was next to nothing. Foreseeable events happened and he and his team were unprepared. He has taken body blow after body blow on the issue yet shows no almost no leadership on this. He just lets events happen. That's the criticism.

Taking that criticism to a higher level is the theory that this administration has repeatedly shown that when faced with foreseeable problems he and his team are often caught out unprepared. That is simply unacceptable. If he can't fix it then he has to say what is in his power and what belongs to Congress and communicate it. He has completely failed at that - even on Ukraine to be honest to some degree. As an example, he has been dragged by our allies into new positions (e.g. the F-16 decision). It isn't all roses there even but generally a success. Even then, when he does show leadership he has trouble taking credit for his wins as well. That's a problem when he is as unpopular as he is.

The debt ceiling is still in the end game, and it's still a GOP default if it happens. Biden should be and has been negotiating to see if there is a win win solution here, however unlikely given the awful state of the GOP, and Mccarthy's complete inability and incompetence at dealing with the full on nutjobs in the GOP.

Again the GOP set him up and he just walked into the trap. They passed a bill - an unrealistic bill - but a bill nonetheless and the Democrats led by him did nothing for weeks/months. Prominent voices begged him and the administration to take positions on things and eventually began criticizing Biden's unrealistic strategy. Even then I still struggle to say it is a strategy to call a bluff on people known to not be bluffing.

But I get it. He is your guy so it's hard to see how he is failing. But I'm telling you as a person who ranks out with the independents...he looks incompetent. We have poll data showing he is extremely unpopular. It isn't hard to see he is unpopular if you talk to non-Democrats. The only place he isn't failing is in the Democratic bubble. It's not a cult but it sure as shit isn't reality either. I mean Krugman is calling him out. That should be a shot across the bow.

They're not going to default. This is the world's biggest game of chicken and both sides are going to play it up until the last possible second. There's too much wealth on both sides to allow the economy to be intentionally driven off a cliff.

Maybe so but the risk levels are off the chart because unfortunately enough machinery has broken down to make it plausible. The Chamber is even hard-line on this. We're in the realm of exotic risk management where the brinkmanship/stakes are so high that they sometime cause the event to become inevitable. Worse we often don't know it was inevitable until we can see it in the rearview and review the wreckage.

[Alefroth]

They're not going to default. This is the world's biggest game of chicken and both sides are going to play it up until the last possible second. There's too much wealth on both sides to allow the economy to be intentionally driven off a cliff.

How do you think it will play out?

[Kraken]

They're not going to default. This is the world's biggest game of chicken and both sides are going to play it up until the last possible second. There's too much wealth on both sides to allow the economy to be intentionally driven off a cliff.

How do you think it will play out?

I have no idea, but I'll spin a yarn: Biden compromises by giving McC 75% of his demands. McC fails to get it through the House because it's not 100%. Meanwhile, Dems have 213 votes for a clean bill; they only need 5 Republicans to join them. Those five will emerge after their own caucus fails and the earliest stages of default appear -- a credit downgrade and some checks not going out. (I don't know how the Dems get a vote on their clean bill, but I think there's some mechanism for the minority party to force a vote.) Alternately, a handful of Dems might go rogue to pass McC's bill.

I don't believe McC will be able to pass any compromise bill without Dem support, and consorting with the enemy will end his speakership.

[waitingtoconnect]

I’d bet if Biden accepts all their demands they will go back and demand even more.

[malchior]

They're not going to default. This is the world's biggest game of chicken and both sides are going to play it up until the last possible second. There's too much wealth on both sides to allow the economy to be intentionally driven off a cliff.

How do you think it will play out?

I have no idea, but I'll spin a yarn: Biden compromises by giving McC 75% of his demands. McC fails to get it through the House because it's not 100%. Meanwhile, Dems have 213 votes for a clean bill; they only need 5 Republicans to join them. Those five will emerge after their own caucus fails and the earliest stages of default appear -- a credit downgrade and some checks not going out. (I don't know how the Dems get a vote on their clean bill, but I think there's some mechanism for the minority party to force a vote.) Alternately, a handful of Dems might go rogue to pass McC's bill.

There is apparently no path for a debt ceiling vote without McCarthy. As far as I know, a debt ceiling bill doesn't have a privileged path. They just used a privileged resolution to push for an expulsion of Santos but an expulsion is specifically allowed. The bottom line is that McCarthy has to allow a vote that would allow GOP rebels to vote w/ Democrats. Maybe he grows a conscience - hah! that'll be the day.

Edit: Apparently there is a discharge petition path that has 210 D members on board. They'd need another 8 members to join them to bring a vote. But that path also requires 10 R Senators as well to get past a filibuster and that assumes some GOP member doesn't object to unanimous consent and draw out the calendar (I'm looking at Cruz or Rand there). It's not impossible but it's far from likely.

I don't believe McC will be able to pass any compromise bill without Dem support, and consorting with the enemy will end his speakership.

Correct which is why I'm pretty convinced barring a major fold by Biden we have a good shot of going over the edge. The GOP is fractured enough that this might be inevitable (this is what I was alluding to before). With Biden suddenly ruling out Executive action (again!) he has once again said he has no cards to play. If he does do something he'll look bad but at this point Biden has misplayed this so badly maybe it doesn't matter. He can fall on his face for all I care -- it isn't like he doesn't have practice at it -- as long as he doesn't just accept we go over the cliff because the Republicans are economic terrorists.

[Isgrimnur]

I’d bet if Biden accepts all their demands they will go back and demand even more.

[Smoove_B]

If he does do something he'll look bad but at this point Biden has misplayed this so badly maybe it doesn't matter. He can fall on his face for all I care -- it isn't like he doesn't have practice at it -- as long as he doesn't just accept we go over the cliff because the Republicans are economic terrorists.

So is Biden's play to do nothing in the hopes that there are secretly rational members of the GOP that are going to remove McCarthy before he allows the default? That they'll somehow meet tomorrow and yank his Speakership and appoint a rational actor? In this way the GOP is punching themselves in the face and Biden doesn't become the target for whatever he might do to stop them?

That seems like it could work if you were dealing with rational actors but I said it earlier - the GOP really seems like they're willing to collapse the economy just to keep stiggin it.

It is kinda interesting how the last time we went through this it was all Pelosi's problem, but somehow the GOP has (once again) moved the spotlight to make it seem like it's Joe Biden's problem (and not McCarthy's).

[Zarathud]

If Biden gives Republicans a way out by relying on him to act unilaterally, they won’t join the Democrats to pass a clean resolution. The Republican Party is divided between ideology to burn it all down and corruption. Biden is betting the Republicans will save their donor’s money…if there is no other option.

[malchior]

It is kinda interesting how the last time we went through this it was all Pelosi's problem, but somehow the GOP has (once again) moved the spotlight to make it seem like it's Joe Biden's problem (and not McCarthy's).

I think most rationale people (aka non-MAGA) realize this is a GOP caused crisis. The criticism of Biden comes down to everyone except Biden seemed to know how this would go. The GOP ran on this. A good deal of the Speaker of the House shenanigans revolved around hard lines on the debt ceiling. Somehow Biden apparently missed it. As Krugman noted, he also unilaterally disarmed and said the "exotic" options were off the table. He expressed hope that Biden would have to just use one of them anyway and deal with the consequences. But then today Biden says he has come around on the 14th amendment but 'doesn't have time' to do it?! It's maddening.

[Alefroth]

If we do end up going over the edge, I wonder how long it'll go on. Maybe after seeing some actual consequences some people might become more willing to resolve it.

[Kraken]

The 14th amendment gambit will fail in a hostile SCOTUS. The relevant text reads "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." Failing to pay a debt is not questioning its validity.