Democrats, let’s turn the debt ceiling standoff into a referendum on Social Security, Medicare, and Medicaid
President Biden has so far insisted he will not negotiate over the debt ceiling. This makes sense on one level. The Republicans are threatening to blow up the economy to get the Democrats to agree to – and share the blame for – unpopular budget cuts. It is easy to see why Democrats want to resist going down this path.
Just saying “no” to negotiations may not work
But in the real world things are not so simple. The House Republicans may pass a debt ceiling bill that includes spending cuts. They are trying to find cuts that voters find acceptable if not appealing. Proposals have been floated to cut spending on IRS enforcement, to implement work requirements for Medicaid, to claw back unspent covid funds, and to end the Covid state of emergency, which would reduce eligibility for a number of important government programs. I expect we will see proposals to cut non-defense, non-entitlement spending as well as proposals to cut future spending. For now, cuts to Social Security, Medicare, and Medicaid seem to be off the table (other than the work requirements for Medicaid recipients).
If the Republicans come up with a proposal that is not radioactive and manage to pass it (far from guaranteed) then President Biden may indeed need to accept their proposal or negotiate for marginal improvements.
Democrats need to set the agenda on fiscal policy
Of course, President Biden and the Democrats do not have to let Republicans set the agenda here. Senate Democrats can pass a bill of their own, and President Biden can stake out a position and try to win over voters and put the heat on Republicans. If they play their cards right, Democrats can turn the debate over the debt ceiling into a confrontation over the future of Social Security, Medicare, and Medicaid, and turn the 2024 election into a referendum on the future of these popular programs.
This is the best chance Democrats have to preserve their Senate majority in the 2024 mid-terms.
To illustrate the approach I have in mind, President Biden could give a speech emphasizing the following points:
If you listen to the noise coming out of Washington, you might think that we face a fiscal crisis, that our spending and debt are out of control. That’s a bunch of malarkey. There is no fiscal emergency. The economy is growing strongly and inflation is coming down. The deficit is coming down. We should avoid erratic cuts that could tip the economy into recession.
There is no emergency. But it is true that government deficits and outstanding debt are expected to rise slowly over the next three decades. This will occur primarily due to an increase in the number of retired people on Social Security, Medicare, and Medicaid, and increasing health care costs.
In the face of these demographic changes, we can maintain a prudent fiscal policy in two ways. We can raise taxes modestly to maintain promised benefit levels. Or we can slash benefits deeply, betraying our commitment to the old and the sick.
Democrats believe that the right way forward is to commit the needed revenues to these critical programs. The benefits under these programs are not excessive. Just ask anyone trying to get by on a Social Security check, or talk to the executive of a rural hospital that is struggling to cover its costs with Medicare reimbursements. In fact, Democrats believe a reasonable case can be made for modest increases in benefit levels. Our country is much richer today than it was when benefit levels were established.
We are willing to work with Republicans to eliminate waste and to find reasonable cost savings, such as on the cost of prescription drugs. But Republicans are committed to sharp cuts in benefits. Some even want to get rid of these programs entirely (see: Paul Ryan, Rick Scott, George Bush, etc.). In fact, almost all of the Republicans in Congress have pledged not to raise taxes for any reason – thus committing themselves to large cuts in Social Security, Medicare, and Medicaid.
As I said, this is not an emergency. We do not need to solve this problem today. But if we do not find additional revenue in the next few years, then substantial cuts will happen automatically due to shortfalls in the Medicare and Social Security Trust funds.
There is no reason for this to happen. These programs were based on long term projections and it is not a surprise that adjustments are needed from time to time.
I hope that Republicans agree to work with us to find additional revenue for these programs. I am asking them to renounce their anti-tax pledge and agree to raise revenues to keep these functioning as originally intended. But if they refuse, we will take our case to the American people in 2024.
Re: “I hope that Republicans agree to work with us”
The whole point of being a Republican is just the opposite of that. There is something to be said for being the anti. Start demanding that the Republicans present their plan. Maybe have a daily press conference that the Republicans have not yet produced their alternative budget that would balance the budget. If they present something that doesn’t 100% eliminate the deficit, denounce it as not being a serious proposal. If it does, there are surely going to be lots of things in it that will serve as attack points.
Let the Republicans shut the government down. That has always been a win for the Democrats. Hold a daily press conference announcing what the Republicans have made unavailable.
Too often the rhetoric has it that the Republicans are a passive force of nature like the wind or stars. No, they are people doing things. Shine the spotlight on them.
If I was the President, I would say in my State of the Union speech that Congress has directed the government to spend a certain amount on each of a wide variety of federal programs and that I am going to follow that directive faithfully.
That directive from Congress is the federal budget that Congress enacted into law and is actually one of the most recent laws Congress has created, and so it should have precedence where it would conflict with older laws. Exception being where it might conflict with the US Constitution itself. And there is no conflict there- it is actually supported by the Constitution , and more so by the14th amendment to the Constitution.
So spend the money you are directed by law to spend. Don’t issue new debt in excess of that which Congress has allowed. Just spend on what Congress said you must.
It really should not be a mystery to anyone that the US Federal Government creates the money we use- it doesn’t necessarily need to ‘get’ the money by taxing or borrowing before spending. Go ahead- pull a Dollar bill out of your wallet and look at the tangible proof of this. Read what is written all over it. It is a piece of high quality paper with ink on it that is worth what the government says it is. If it says 1 dollar or 100 dollars it is of little material difference in its creation.
The ‘debt limit’ law is a contradiction to the most recent laws Congress has enacted. There is no reason it should take precedence over any other law Congress has enacted. Biden should just direct the Treasury to continue the spending Congress has ordered it to do without issuing new debt- since that is apparently what Congress has ordered. Those checks will not bounce.
Ahhhh
Someone who gets it right.
“It really should not be a mystery to anyone that the US Federal Government creates the money we use- it doesn’t necessarily need to ‘get’ the money by taxing or borrowing before spending.”
The US is monetarily Sovereign. There is no Germany around to hold our feet to the fire. There is no group of nations we are in union with today economically. Indeed, the US supports them with the dollar. I believe we have ~$100 trillion in circulation. Nations hold US dollars as it is safe currency. It also comes in handy when the Fed goes on a bender trying to rein in inflation by whacking Labor instead of the real issues. Damn, those hens want more money for their eggs. What a joke . . .
Like our one commenter from the Philippines said, when the US raises Fed Rates, they pay more for things, etc.
The GOP is frustrated because they vote huge sums for defense and enact enormous revenue-reductions and expect federal largesse when I suits them and still expect a balanced budget to appear out of nowhere. That all that’s necessary to achieve this is drastic cuts in social spending that Dems will never accept. This never changes. Will it ever?
Would this be for the 2023 election or for next year when Dems are in an epic struggle with Forces of Evil?
I’m kicking myself that I didn’t think of this.
Just go to the electorate and say “We’re the high tax party. They’re the low tax party. Make up your minds.”
So simple it’s brilliant.
What could possibly go wrong?
Nicholas:
I believe Eric is encouraging people to discuss alternatives. He extended himself. So what is your plan? Just asking . . .
Toured your site. Have you ever been in a prison? Detention is like pre-school for future level 4s.
Thanks for your questions in your second line — but I don’t understand your question.
What you said:
My question, “What is your plan?”
I sensed sarcasm. So, I asked the question.
To get to Social Security stability, the tax increase would be minimal. If you read some of the comments here, you might not see such in print. However, Coberly (Dale) in junction with Bruce Webb submitted a plan to SS. SS responded it would work to head off any short falls. It consisted of very small increases in the SS tax for Labor and business alike. Of Congress being who they are will putter around till it actually becomes a major issue, before doing anything.
Medicare is partially paid for by citizens and partially by other funding.
Maybe just print off some more $dollars to solve the issue.
Of course, it gets easier to pass anything during a crisis. We could always wait till that critical point for SS.
So, I am curious Nicholas, what is your plan? What are you thinking?
I also was reading this article on Detention which was linked to your site. Detention
Sec. 4, 14th Amendment.
Jackd
i should have included you among those who know what they are talking about, but the Congress knows all about the 14th amendment and has learned it can so without either the law or the truth…and the democrats let them get away with it for reasons of their own.
This is very scary.
I think Nicholas may be the only one here who gets it right.
and i wonder what the hell i have been doing here for the lastten years or so if a regular contributior can say Social Security is a driver of the debt/deficit. It is not. and it is not malarky (to say that it is) it is a damned lie.
people pay for their own social security. those people who think the young pay for the old have apparently never had a savings account. all finance is essentially the art of moving money across time. when you save money you are relying on some mechanism by which it will come back to you in some future time, but the cash itself always only appears if someone else…as a result of that mechanism…appears as if by magic…to supply the cash you were promised when you trusted your money to that mechanism, whether SS, a savings bank, or a stock market , or a personal you.
it is not wise to open a can of worms by “negotiating” with criminals…like Republicans.
what could go wrong, indeed.
[and i thought we had laid magical monetary theory to rest here at least. it solves nothing. takes away the crocodile tears about the deficit and replaces it with crocodile tears about the inflation, the same people making the same decisions with the same motives and the same lies.]
If you want to lay MMT to rest, you are going to need to point out exactly where it is wrong. And I don’t think you are going to be able to do that. Nothing personal there- it’s something I have spent six years trying to do myself, and it’s something many professional economists have tried to do also. And they have not succeeded either. But good luck to you anyways.
jerry
i think if you think it through you will see that it accomplishes nothing.
just changes the deficit lie into the inflation lie. you will still get the same policies and the same liars.
let me know why you think this is wrong.
I believe that you and I share many of the same ideas and goals or hopes about what we want the Social Security program to do. If we arrive at the same destination, perhaps the path we take to get there is of less importance. That you can explain it one way, and I can explain it another way should only be a good thing in the scheme of things.
Social Security is too important a program, and life is too short, for us to argue about which way we get there, so long as we are both going to the same place and actually get there.
jerry
agreed.
we can argue about it later.
Jerry Brown
The point is not to argue. I have no desire to defeat you in argument, much less hurt your feelings..as i seem to do with so many here. And I am certain I can ot change your mind. People don’t do that very often.
But I do think it is very important to get people to uunderstand that they pay for their own Social Security…it is not “the young paying for the old…and to recognize the lies they have been told so often by “serious people” that they have become part of their brain’s wiring so they “believe” them automatically as part of their thought process even as they think they are arguig agains “zombie lies.” The best I can hope for is that by “arguing” with you, some other readers who haven’t really thought–or mis-thought= about it yet willhave a chance to understand it from the beginning.
Jerry again
as for MMT, I really don’t want to argue about that. I have been burned on that subject and don’t need more enemies than i need right now.
SS taxes “communicate” with the rest of the budget via debt obligations. If you raise that tax at now, if there is excess funds flowing in, that excess goes to Treasuries and what the rest of the revenue system needs to do gets unburdened to that extent. Same if the impact is shrinking net redemption amounts. So okay, you want to say it has no impact on the deficit, you can certainly make that case, but there are reasons that the excess taxes never got invested in anything other than Treasury debt and a very big one is those reasons is that excess unburdened the rest of our revenue system’s efforts to cover deficits. So another dollar of SS taxes makes paying for Ukraine, or ACA subsidies, or I-70 maintenance easier. Those taxes darn well function as if they were somehow part of the deficit picture, whether or not you can have an accounting that proves they aren’t. Somewhat regressively raised SS taxes substitute for more progressively raised general revenue. Redeem to Trust Fund and then balance the SS program with new taxes at the point the actual shortfalls are imminent.
erik3is”77
with all respect
if you change your point of view from economic fairy tale to what happens
worker pays into SS, SS records his contribution as “his” and guarantees return with interest–based on performance of economy, including automatic adjustment for inflation– and pays worker back when due.
that “money” never enters the budget system.
your theory depends on too much sleight of hand. at the end of the day we still have so much product from the economy distributed to the people who produced it (including government workers and contractors).
a stronger argument from you might change the way i understand it, but not very likely it will change the way SS works.
eric
when you call SS regressive you lose all credibility with me. at some point when you read too much “economics” your brain can’t tell reality from the spin.
As long as ordering up pork-related spending is separate from allocating funding then we’ll have problems What is wanted is a way to get goodies for your constituents and get other peoples’ to pay for them.
US Navy replacing 19 new ships with newer ones
Err: only 8, not 19. All littoral combat ships about 4 years old that never worked well. Past warranty period no doubt.
(Nine actually).
A consortium of players with economic ties to the ships — led by a trade association whose members had just secured contracts worth up to $3 billion to do repairs and supply work on them — mobilized to pressure Congress to block the plan, with phone calls, emails and visits to Washington to press lawmakers to intervene.
It has been asserted over & over that there is little direct societal benefit to defense spending but much to defense contractors, lobbyists & politicians. Somehow we need to put a stop to this.
Fred
I used to sort of agree with this, but then I realized the other side had bad guys too.
Bad guys on both sides? So what. I can never again vote for the GOP.
Dobbs
my comment was in reference to defense spending, which in an evil world we cannot do without.
i can’t vote for any Republican either. but neither do I trust the Democrats. The R’s have become the frank party of evil in America. As far as I can tell the Dems talk about doing good, but never seem to quite manage to do anything effective.
Republicans don’t care about the budget; they simply hate socialism and minorities. For a bunch of people who claim to be Christian, they sure are pretty Old Testament instead. What’s the US military budget these days? Over one trillion including off-budget things like Afghanistan, Iraq, Yemen, Syria and all the walking dead from those wars? Yeah, let’s cut school lunches, PBS and public healthcare because those things are evil and commie. LOL.
The Yellowstone Caldera is overdue…personally, I think we should all go there and jump up and down until it blows. Save the world and all that.
WSJ – Kevin McCarthy insists on Deficit Elimination
McCarthy said Republicans would seek to eliminate the annual budget deficit in talks with Democrats over raising the debt limit, a demand that would likely require deep cuts to federal spending. …
Since they took control of the House last month, Republicans have been arguing that Congress should cut spending in exchange for GOP support for raising the debt limit, now at about $31.4 trillion. In an address Monday ahead of President Biden’s State of the Union address on Tuesday, Mr. McCarthy (R., Calif.) laid out the size of the cuts Republicans are seeking. …
… Under the deal with holdout Republicans that got Mr. McCarthy elected as speaker, the House Budget Committee, which is responsible for a budget blueprint, must produce a resolution that balances the budget in no more than 10 years.
Mr. McCarthy has previously said that he wouldn’t agree to spend more in fiscal year 2024 than has been appropriated for the current fiscal year. Some Biden administration officials don’t expect Congress to approve any spending increases under the Republican majority and view last year’s $1.7 trillion omnibus as their last major spending effort. …
Biden in SOU address to say that taxing the wealthy is necessary to reduce income inequality
In his first State of the Union address since the G.O.P. took the lower chamber, the president will call for higher taxes on the wealthy and more social aid to the Needy…