The suspense is not over, but the hair-raising prospect of an unresolved standoff causing the economy to tank seems to have receded.
The Memorial Day weekend brought an agreement between the Biden administration and negotiators for the House Republican majority that had passed a bill seeking deep budget cuts in exchange for raising the ceiling on the level of debt allowed for the U.S. government.
It is a deal, now put in writing in a bill, that both sides should accept for one simple reason: It suspends the nation’s $31.4 trillion debt ceiling through Jan. 1, 2025, averting default on U.S. debts, and the economic calamity that’s been forecast as the result. And it does so by laying out a middle path — a rarity in these partisan times.
This is not the way to handle budget negotiations, of course. President Joe Biden initially had said he would not bargain over raising the debt ceiling itself, but given the reality that the GOP-led House had passed a bill linking it with budget cuts, he was compelled to back down. Difficult but ultimately successful talks followed.
The initial reaction on Capitol Hill, unfortunately, was the rumbling over the bill’s provisions — not from the centrist deal-makers but from the extremes on the right and left.
Some Republicans on the House Rules Committee were balking on support in its scheduled vote today, saying that the agreement didn’t accomplish enough savings. For their part, House Democrats have opposed the bill’s expansion of work requirements for some federal safety-net benefits.
The takeaway message should be: Consider the alternative. The refusal to accept compromise, especially in government this sharply divided, is irrational, undermining the full faith and credit of the United States and the stability of Treasury bonds, with other economic ripple effects.
It’s not clear how many economic dominoes could fall. But the public at large would bear the brunt of the damage, in the form of recession and job losses that would be the anticipated fallout.
Overall, the pact aims to focus on reducing discretionary spending and limiting its growth, while protecting defense, veterans programs and entitlements.
A few bullet points:
>> The work requirement sought for Medicaid was withdrawn, a concession to Democrats. Additionally, the upper age limit on work requirements for those receiving Supplemental Nutrition Assistance Program (“food stamps”) benefits would rise from 49 to 54, but that expansion would expire in 2030.
Locally, state social service officials must ensure that those in need are helped to navigate changes to the program, rather than get lost in a bureaucratic maze and fall through the cracks.
>> Some money allotted but unspent during the COVID-19 pandemic would be rescinded. Now that the public health emergency has officially ended, it’s sensible that the unused funds be saved.
>> The deal includes reforms House leadership sought to speed energy-project permits, but leaves intact the climate and clean-energy measures in the Inflation Reduction Act (IRA). This is good news for Hawaii, which stands to benefit from appropriations under the IRA.
On the whole, most of the changes would be likely features of a pact that would be needed anyway when the current budget lapses in October. The regular order of budget negotiations is the proper time for talks, rather than by taking the debt ceiling as a hostage — a tactic that has failed to instill spending discipline.
If they win back the House in 2024, the Democrats should repeal the entire debt-ceiling exercise. But for now their duty — as well as that of Republicans — is to take the deal and move on.
