In just two years of Joe Biden’s presidency, our national debt has grown by $3.8 trillion. Beginning in 1929, it took the U.S. Treasury 61 years to accumulate that much borrowing.
Yet Biden has the temerity to call Republicans “fiscally demented.”
The fight over raising the debt ceiling is just beginning, and already the embattled president is insulting those who oppose his reckless spending, which is, as I write this, crashing our economy. It will get worse — the downturn and the name-calling.
President Biden tossed trillions in unnecessary COVID-19 relief onto a fast-recovering economy, punching up inflation to 40-year highs as too many dollars chased too few goods.
The Committee for a Responsible Federal Budget reckons Biden has added $4.8 trillion to our deficits through executive actions and legislation. This is in addition to our normal spending.
Meanwhile, no one – including many Republicans – has been minding the store.
Now we see the beginning of the recession that the Federal Reserve deems necessary to drive down inflation. Retail sales, housing and manufacturing have turned down. Federal Reserve Chairman Jerome Powell has said unemployment must go up and growth must go down in order to reach the central bank’s 2 percent official inflation target.
We are, in effect, about to pay for Joe Biden’s largesse — with people losing their jobs and businesses going under. When our nation’s biggest banks set aside billions to cover expected loan losses, as they just did at the end of the year, it is because they expect companies to default on loans and people to get into trouble financially. This is not an act of God; this is because our leaders spent too much money.
Republicans in the House, now in the majority, want to slow spending. To elect Rep. Kevin McCarthy (R-Calif.) Speaker, a group of conservatives demanded that he deliver a plan to balance the budget in the next 10 years, and also promise to pair any increase in the debt ceiling with spending cuts.
The Biden White House is aghast. They want the debt ceiling increased with no concessions and, as spokesperson Karine Jean-Pierre has announced, they will not negotiate on the matter. Treasury Secretary Janet Yellen announced last week that we would soon reach the debt cap of $31.4 trillion ($247,000 per taxpayer), causing her department to undertake “extraordinary measures” to keep the federal lights on.
That moment has arrived. Her maneuvering will keep Treasury borrowings below the lid until sometime in June, at which point the government will not be able to borrow more funds.
Prepare for a massive public relations fight. Biden and his Democratic colleagues are already portraying GOP House members as rabble rousers and agents of chaos — ready to sabotage our economy, torch markets and bring on a financial crisis. The liberal media will broadcast that Social Security payments will cease and veterans will go hungry.
But Democrats do not occupy the high ground here. Even as inflation soared under their watch, they kept spending. Total U.S. debt has jumped to 100 percent of GDP, up from 39 percent in 2008. Higher interest rates and expanding deficits mean that payments on our debt are set to surpass defense and Medicaid spending in just a few years, according to the Congressional Budget Office.
Meanwhile, in the just-concluded first fiscal quarter of 2023, interest payments on our debt shot up 37 percent and the deficit widened by 12 percent — sobering news indeed.
Republicans need to sell the public on the virtues of cutting discretionary spending. (Reforming our entitlements programs, which account for 64 percent of the federal budget, should also be on the table, but don’t hold your breath.) They must convince people that:
- Continued excessive spending will push inflation higher for longer;
- Ongoing and necessary monetary tightening will drive up the cost of buying a car or a home;
- Allocating to the government an ever-larger share of our economic pie means less productivity and slower wage growth in coming years.
The public understands that you cannot endlessly live beyond your means.
The Peter G. Peterson Foundation tracks sentiment about our fiscal situation. A survey conducted last month shows that “76% of voters want the national debt to be a top-three priority for the president and Congress, including 69% of Democrats, 72% of independents and 88% of Republicans.” Some 89 percent of respondents want lawmakers from both parties to work together to address our out-of-control budget.
Will the White House strike a bargain with the GOP to bend the arc of spending? They say no. They argue that the debt ceiling vote is not the place to take a stand, that raising the cap is necessary to pay for bills already passed by Congress.
That would include the $1.7 trillion 4,000-page omnibus bill jammed through in December. The Democrats’ spending package included $800 billion for domestic outlays, a 9.3 percent jump from the prior year. With soaring inflation and mounting debt, did Democrats really think we needed a 16 percent boost in “Legislative Branch” outlays or an 8 percent jump in Transportation-HUD funding? Or 7,200 earmarks totaling $15 billion?
The enormity and recklessness of that spending bill begs for a fight. If it comes over the debt ceiling, so be it. Better a messy brawl now than continuing down a self-destructive path.
Kevin McCarthy must craft a compelling argument and keep his caucus united in the fight for spending cuts. It will be tough and ugly. But someone who survived 15 votes to become Speaker has grit. Let us hope he uses it wisely.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.