Don’t expect House Republicans to bring back the Tea Party agenda
Experts told me they don't expect a debt ceiling crisis this year.
Twelve years ago, Tea Party Republicans took control of the House of Representatives. To gain leverage over President Barack Obama, they vowed to oppose any increase in the debt ceiling that wasn’t paired with significant spending cuts. If Obama and House Republicans hadn’t reached a deal by mid-August, the U.S. would have defaulted on the national debt and triggered a global financial crisis.
On August 2, 2011, with just days to spare, Obama and House Republicans reached a deal to raise the debt ceiling and cut spending by more than a trillion dollars over 10 years. The fiscal drama unnerved Wall Street: The rating agency Standard & Poor’s downgraded U.S. debt on August 5, and the S&P 500 fell 17 percent between July 29 and August 8.
Now another Republican majority is taking power in the House, and some Republican legislators have signaled their intent to once again use the debt ceiling to force spending cuts. Dylan Matthews at Vox has reported that a “2011 standoff looks unnervingly possible” in 2023, and some pundits are warning of the “Next Debt Ceiling Crisis.”
Breaching the debt ceiling would be disastrous for the economy. Indeed, even the possibility of a debt ceiling crisis could shake market confidence and tip the nation into a recession.
But the experts I spoke to expected 2023 to play out differently from 2011. While many Republicans still talk a big game about fiscal responsibility, the politics of the issue have shifted dramatically.
Andrew Biggs, a senior fellow at the American Enterprise Institute, told me that Republicans face a fundamental tension between their constituency and their ideology. “Republicans are historically the party of small government. But Republicans are increasingly the party of people who benefit from Social Security and Medicare.”
And these programs constitute nearly half of federal spending, so it’s hard to significantly cut the deficit without touching them.
So while Congress will certainly have some heated arguments in the coming months, especially around discretionary programs that have modest price tags but high culture war salience, don’t expect a repeat of the dramatic showdowns we saw 12 years ago. A prolonged government shutdown—to say nothing of another debt ceiling crisis—wouldn’t play to Republicans’ advantage, and Republican leaders know it.
Republicans’ two fiscal factions
When John Boehner took the speaker’s gavel in 2011, he led a caucus that broadly agreed on the need for dramatic deficit reduction. In contrast, Kevin McCarthy—or whoever takes the speaker’s gavel—will preside over a Republican caucus that’s internally divided over fiscal issues.
On the one hand are fiscal hawks who want deficit reduction to be a top Republican priority in 2023, just as it was in 2011 and 1995.
Inflation has made this narrative especially salient, as Republicans are able to blame higher prices on Democrats’ fiscal irresponsibility. Danny Weiss, a senior fellow at the Century Foundation and former chief of staff to Speaker Nancy Pelosi, told me that so long as inflation stays high, Republicans have a strong incentive to focus on the deficit.
But there’s also a significant faction of fiscal moderates who draw their inspiration from President Donald Trump, who vowed not to cut Social Security and Medicare during the 2016 campaign and presided over a large increase in the deficit.
“This Republican class is very different than the one elected in 2010,” Ben Ritz of the Progressive Policy Institute told me. A decade ago, Tea Party Republicans viewed cutting government spending as a top priority. In contrast, he said “this class is all in on the Trump culture war.”
Shortly after the 2010 elections, House Republicans voted to ban earmarks for the upcoming Congress. In contrast, Weiss noted, House Republicans recently voted to keep earmarks, opening the door for members of Congress to sponsor pet projects in their districts.
At the same time, nearly 90 percent of Republican members of Congress have taken a “no new taxes” pledge. And even fiscal moderates often lampoon what they see as excessive spending by the Biden administration. So there isn’t a stark divide between fiscal hawks and doves in the Republican caucus—it’s more of a spectrum.
Crucially, neither McCarthy nor Senate Minority Leader Mitch McConnell seem to be fiscal firebrands. McCarthy is what Ritz called a “political politician,” meaning he’s focused on checking off narrow party priorities but has little appetite for larger structural reforms. McConnell, too, has shown little concern about the deficit; he threw his support behind the recent $1.7 trillion omnibus package.
Cutting Social Security or Medicare is a nonstarter
Republican disunity is particularly evident when it comes to two of the biggest government programs—Social Security and Medicare. At least three Republican senators—John Thune of South Dakota, Rick Scott of Florida, and Ron Johnson of Wisconsin—have expressed interest in entitlement reform. And 16 House Republicans have written an alternative 2023 budget that seeks to “avert a debt crisis” in part by raising the Social Security retirement age and by reducing benefits.
But they’re opposed by other Republicans—including Sens. J.D. Vance of Ohio and Josh Hawley of Missouri—who have denounced cuts to these entitlement programs.
Meanwhile, Democrats have become more unified in their support for generous Social Security benefits. Biggs, who worked on George W. Bush’s 2005 Social Security reform attempt, pointed out that back then “you had moderate Democrats, particularly in the Senate, who were willing to fix Social Security through tax increases and benefits cuts.”
In contrast, 90 percent of House Democrats today have “co-sponsored legislation to increase Social Security benefits across the board, funded by pretty substantial tax increases,” Biggs said. “As far as I know, there are no House Democrats who have said they’re open to benefit reductions.”
So the prospects for entitlement cuts have gotten worse on both sides of the aisle over the last 10 or 20 years. And even 20 years ago, those prospects were not very good, as the failure of Bush’s reform proposal demonstrated.
“Republicans will talk about cutting Social Security and Medicare,” said Bill Gale, a budget expert at the Brookings Institution. “But they were in power for several years and didn’t do anything in that regard, so it’s mainly opposition talk.”
Why a debt crisis is unlikely
Both Biggs and James Capretta, another AEI senior fellow, emphasized the poor optics of a Republican House threatening to provoke a debt ceiling crisis to gain leverage in budget negotiations—especially if they’re pushing for unpopular cuts to Social Security and Medicare. “It’s a completely losing strategy,” Capretta told me.
So if there is a major budget confrontation this year, it will likely be over discretionary spending, just as it was in 2011, according to Marc Goldwein of the Committee for a Responsible Federal Budget.
The Republican agenda for nonentitlement spending, though, is difficult to pin down. Ritz gave three examples of Republicans’ current fiscal priorities: Greater defense spending. More resources for border enforcement. And perhaps cutting funding for IRS enforcement. Notice that all three of these actions are likely to increase the deficit.
That’s not to say Republicans have no desire to cut discretionary spending. In fact, there are so many tiny discretionary spending programs, Biggs told me, that Republicans will have no trouble finding programs that “hit conservative hot buttons on race or sexual identity.” Weiss also predicted that formerly nonpartisan science funding may come under increasing scrutiny from Republicans, like money for the National Institutes of Health.
But these ideological fights are not very well suited to a debt-ceiling showdown. If Republicans want to argue that the deficit is such a big problem that it merits risking a financial crisis, they’ll need to propose spending cuts large enough to significantly reduce the deficit. But that’s hard to do if cuts to Social Security, Medicare, and the military are off the table.
Nondefense discretionary programs are already a small share of overall federal spending, in part because Republicans have targeted these programs for cuts in the past.
So Biggs believes that negotiations between Biden and House Republicans are likely to have a negligible impact on the deficit—and could even increase it. We saw this in recent budget cycles, Ritz said. The parties “would bid each other up,” Ritz told me.
The Bipartisan Budget Act of 2018, for example, raised discretionary spending caps by $143 billion, allowing Democrats to get higher nondefense discretionary spending in return for Republicans increasing defense spending. This year we’re more likely to see a repeat of the 2018 budget dynamics than a 2011-style standoff. As this week’s rocky start to the 118th Congress demonstrated, any “crisis” seems likely to be one Republicans inflict on themselves.
Aden Barton is an economics student at Harvard. You can follow him on Twitter.
I find myself curious what the biggest individual jumps in spending/deficit have been. Off the top of my head, thinking Iraq War, ACA, TCJA. Is there any way to find a list of such programs over the last few decades, or are those kind of jumps not very noteworthy in the grand scheme of things, and it's incremental few percentage points a year that add up over time, or demographic changes as more people use existing programs? Has there ever been a drop in spending?