McCarthy, House Republicans risk chaos for US economy to force spending cuts- National & International News – WED 18Jan2023

House Republicans ready to hold US economy hostage to cut domestic spending. Find out what the GOP wants (and doesn’t want) to cut, and how the debt ceiling fight could affect you.

NATIONAL NEWS

House Republicans ready to hold US economy hostage to cut domestic spending

There are any number of sideshows featuring in the political circus of the House of Representatives right now. These include the GOP’s hypocritical sleight of hand over Biden and Trump’s classified documents; Speaker Kevin McCarthy’s political tightrope; and now, the two committee appointments for the “man of many faces” George Santos (known aliases: George Devolder, Anthony Devolder, Anthony Zabrovsky).

But there’s only one issue that should be of concern to most voters: the upcoming debt-ceiling fight.

Treasury Secretary Janet Yellen has warned that the US will meet its debt servicing limit of $31.4 trillion as soon as this week. Beyond that point, the Treasury can undertake “extraordinary measures” to temporarily stave off a disastrous debt default and a government shutdown, perhaps until June. Some believe these measures could carry us up to August. However, allowing the debt limit wrangling to drag out across the summer would be disastrous for the markets and possibly even tip the US into a full-blown recession.

Congress must raise the debt ceiling, as they’ve done 78 times since 1960. Back in 2011, Republicans forced a drawn out showdown over the debt ceiling by demanding huge cuts in domestic spending. That delay in raising the debt ceiling resulted in the US credit rating being briefly downgraded, which increased the interest payments on government loans.

The effects of an actual default on the public debt are difficult to predict since such a thing has never happened before. Even conservative estimates predict it would kill millions of jobs, increase the cost of borrowing for average consumers (including loans, mortgages and credit cards), and increase the national debt. In the current economic climate, a default would bring about a recession, if not a depression. The Republicans are threatening no less than economic catastrophe in order to get their way.

McCarthy (now) says he’s not interested in cutting wasteful defense spending

Republican House Speaker Kevin McCarthy has stated that his goal is to trim $130 billion from the FY 2023 budget passed by the Democrat-controlled Congress in December, without cutting a penny from defense spending. This is a reversal from McCarthy’s proposal earlier in the month (during his Speakership fight) to cut Pentagon spending by $75 billion.

The FY 2023 budget, negotiated by Republicans and Democrats, already apportions over $100 billion more in defense spending than domestic spending. This is despite the fact that the Pentagon recently failed its fifth audit in a row, and miserably so.

Social Security on the chopping block

Instead of targeting Pentagon waste, McCarthy and the Republicans want to cut domestic spending even further. In recent remarks, McCarthy indicated he wanted to negotiate on “entitlements” like Social Security, describing them as “going bankrupt”. Republicans often describe Social Security as insolvent, which simply isn’t true.

Social Security is facing a demographic crunch as more baby boomers retire, but Democrats have proposed ways to remedy this. In 2022, a payroll tax of 6.2% only applied to individual earnings up to $147,000. This means that while a worker earning $147,000 pays 6.2% of their income in Social Security payroll taxes, a worker earning $1.47 million pays just 0.6% of their income. “That may make sense to somebody,” said Sen. Bernie Sanders (I-VT), “It doesn’t make sense to me.”

Sanders and Sen. Elizabeth Warren (D-MA) have proposed increasing that cap to $250,000, and applying payroll taxes to earnings beyond that number. By doing that, the government could fully fund Social Security beyond 2096 and even increase monthly benefits. 

McCarthy hasn’t stated what his plans for Social Security are, but they aren’t likely to be along these lines. Republicans usually argue for either privatizing Medicare and Social Security or cutting benefits. It’s likely McCarthy’s proposal will be along these lines. Privatizing Medicare and Social Security or cutting payments would be disastrous for beneficiaries and both ideas are enormously unpopular.

Forced shutdown of federal agencies and regulatory bodies

Other frequent targets for GOP deficit hawks include crucial regulatory agencies like the EPA, OSHA, and the FDA. These agencies are already struggling to function due to prior cuts. Further cuts could seriously jeopardize things like food safety, workplace safety and enforcement of environmental regulations against pollutants. A putative “spending prioritization” plan by Republicans (in the event they fail to raise the debt ceiling) reveals they would be willing to cut funding for these agencies, as well as the FAA and border security. 

Some Republicans have even floated a bill which would essentially abolish the IRS. Others have demanded that Congress reverse a provision of Biden’s infrastructure bill that would increase IRS enforcement and audits for individuals earning more than $400,000.

Showdown with Biden, Senate

The White House has already condemned the GOP prioritization proposal as a recipe for economic catastrophe. Even moderate Republicans have said that McCarthy and their other hardline colleagues are being unrealistic. 

It’s not even clear how committed McCarthy is to dying on this hill. McCarthy has already revealed he’s willing to promise anything to anyone to keep his seat. However, the concessions that GOP hardliners extracted from McCarthy during his Speakership fight may force him, and the rest of the country, to join hands and jump off this economic cliff along with them. 

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