- CD275: Debt Ceiling 2023: Crisis Normalized Jennifer Briney 2:02:07
Another unnecessary crisis averted. In this episode, Jen examines the debt ceiling crisis events of the past to show that the Fiscal Responsibility Act of 2023 – which raised the debt ceiling – is not likely to reduce our government’s debt but will likely ensure that our environment will be trashed for profit. She also examines the best path forward to ensure that the debt ceiling is never used for political leverage again.
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Background Sources Congressional Dish Episodes
Debt Ceiling Overview
“US debt ceiling – what it is and why there is one.” Natalie Sherman. Jun 2, 2023. BBC.
“What Happens When the U.S. Hits Its Debt Ceiling?” Noah Berman. Last Updated May 25, 2023. Council on Foreign Relations.
“A brief history of debt ceiling crises and the political chaos they’ve unleashed.” Raymond Scheppach. May 12, 2023. The Conversation.
“Congress has revised the debt ceiling 78 times since 1960. An expert explains why.” Scott Simon and Lennon Sherburne. April 29, 2023. NPR.
New Development Bank
“BRICS New Development Bank de-dollarizing, adding Argentina, Saudi Arabia, Zimbabwe as members.” Ben Norton. Jun 8, 2023. Monthly Review Online.
“NDB Board of Directors held its 40th meeting.” Jun 5, 2023. New Development Bank.
Debt Limit History
“The Debt Limit Through the Years.” Bipartisan Policy Center.
“US government shutdown to end after Congress passes debt ceiling deal.” Paul Lewis and Dan Roberts. Oct 15, 2013. The Guardian.
“S.& P. Downgrades Debt Rating of U.S. for the First Time.” Binyamin Appelbaum and Eric Dash. Aug 5, 2011. The New York Times.
“Gingrich Vows No Retreat on Debt Ceiling Increase.” Clay Chandler. Sept 22, 1995. The Washington Post.
“House Democrats Move to Force a Debt-Limit Increase as Default Date Looms.” Carl Hulse. May 2, 2023. The New York Times.
“Can Congress Make an End-Run Around a Debt Limit Impasse? It’s Tricky.” Carl Hulse and Jeanna Smialek. Apr 7, 2023. The New York Times.
“2023 VAT Rates in Europe.” Cristina Enache. Jan 31, 2023. Tax Foundation.
“National Debt: Definition, Impact, and Key Drivers.” Updated May 25, 2023. Investopedia.
“Briefing Book: What is the Child Tax Credit?” Updated May 2021. Tax Policy Center.
- Sets spending caps for fiscal years 2024 and 2025 2024:
- Over $886 billion for defense
- Over $703 billion for non-defense
- If there is a continuing resolution in effect on or after January 1, 2024 for fiscal year 2024, or a continuing resolution for 2025 on or affect January 1, 2025, defense and non-defense spending will be sequestered, meaning a 1% across the board cut
- Explains how the House of Representatives must implement this law
- Explains how the Senate must implement this law
- Takes money back from accounts where it wasn’t all spent including from:
- The Public Health and Social Services Emergency Fund
- The Centers for Disease Control and Prevention
- Specifically their COVID vaccine activities and vaccine supply chains
- All the money except $7 billion for COVID testing and mitigation
- All of the SARS-CO-V2 genomic sequencing money except for $714 million
- All of the money for COVID global health programs
- International Disaster Assistance funds for the State Department
- National Institutes of Health – National Institute of Allergy and Infectious Diseases
- Centers for Medicare and Medicaid Services
- Community health centers
- National Health Service Corps
- Nurse Corps
- Graduate level teaching health centers
- Mental health and substance use disorder training for health care professionals and public safety officers
- Grants for mental health for medical providers
- Funding for pediatric mental health care access
- Grants for survivors of sexual assault
- Child abuse prevention and treatment
- Medical visits at home for families
- State and local fiscal recovery funds
- Rural health care grants
- Restaurant revitalization fund
- Elementary and secondary school emergency relief funds
- Housing for people with disabilities
- Housing for the elderly
- Grants to Amtrak and airports
- Air carrier worker support and air transportation payroll support
- Defunds the IRS by approximately $1.4 billion
- Requires agencies to submit plan to reduce spending in an equal or greater amount to every action they take that increases spending. This is easily waived and expires at the end of 2024..
- At the end of September, people with Federal student loans will have to begin repayment of their loans, and the Secretary of Education is not allowed to implement an extension of the payment pause.
- Orders reports about work requirements for welfare payments
- In order to receive food benefits for more than 3 months in a 3 year period, “able bodied” people have to work at least 20 hours per week or participate in a work program for 20 hours per week unless that person is under 18 or over 50 years old, medically unable to work, is a parent with dependent children, or is pregnant. This provision increases the work requirement age over the next few years so it becomes 55 years old. This provision adds homeless individuals, veterans or foster kids until they are 24 to the list of people exempt from the work requirements This provision expires and the qualifications revert back to what they used to be on October 1, 2030
- Changes the requirements for NEPA environmental studies to include “any negative environmental impacts of not implementing the proposed agency action in the case of a no action alternative…” and requires only “irreversible and irretrievable commitments of FEDERAL resources which would be involved in the proposed agency action should it be implemented”
- Adds circumstances when agencies will not have to produce environmental impact documents
- Requires environmental impact statements when the action has a “reasonably foreseeable significant effect on the quality of the HUMAN environment.”
- Allows agencies to use “any reliable data source” and says the agency is “not required to undertake new scientific or technical research unless the new scientific or technical research is essential to a reasoned choice among alternatives and the overall costs and time frame of obtaining it are not unreasonable.”
- Assigns roles for “lead agencies” and “cooperating agencies” and says that the agencies will produce a single environmental document Sets a 150 page limit on environmental impact statements and 300 pages for a proposed agency action with “extraordinary complexity”
- Sets a 75 page limit on environmental assessments
- Requires lead agencies to allow a “project sponsor” to prepare environmental assessments and environmental impact statements under the supervision of the agency. The lead agency will “evaluate” the documents and “shall take responsibility for the contents.”
- Environmental impact statements must be complete in under 2 years after the EIS is ordered by the agency
- Environmental assessments must be completed in 1 year
- The agency may extend the deadlines
- Project sponsors are given the right to take government agencies to court for failure to meet a deadline
- “Congress hereby ratifies and approves all authorizations, permits, verifications, extensions, biological opinions, incidental take statements, and any other approvals or orders issued pursuant to Federal law necessary for the construction and initial operation at full capacity of the Mountain Valley Pipeline.”
- Gives the Secretary of the Army 21 days after enactment of this law to issue “all permits or verifications necessary to complete the construction of the Mountain Valley Pipeline across the waters of the United States”
- “No court shall have jurisdiction…” to review “…any approval necessary for the construction and initial operation at full capacity of the Mountain Valley Pipeline… including any lawsuit pending in a court as of the date of enactment of this section.”
- Suspends the debt limit until January 1, 2025
- On January 2, 2025, the debt limit will automatically increase to whatever amount the debt level is at the end of the suspension
Audio Sources Senate Session
June 1, 2023
May 31, 2023
May 30, 2023 House Committee on Rules
22:50 Rep. Jason Smith (R-MO): I should note for my colleagues that Democrats could have raised the debt limit last year when they controlled the House of Representatives.
35:30 Rep. Ron Estes (R-KS): The Fiscal Responsibility Act finally ends the federal student loan moratorium and the so-called interest pause, effective August 31, 2023. For every month borrowers were allowed to skip payments, $4.3 billion were added to the American taxpayers debt. 41 months later, the moratorium has cost American taxpayers approximately $176 billion.
1:01:15 Rep. Joe Neguse (D-CO): The President put forward a budget months ago. Chairman Smith, do you know when the President submitted his budget to the United States Congress? Rep. Jason Smith (R-MO): I don’t remember but it was — Rep. Joe Neguse (D-CO): It was March 9th. Rep. Jason Smith (R-MO): It was late. It was due February 1st. Rep. Joe Neguse (D-CO): Oh, I’m glad you noted that. Chairman Smith, when did the Republicans submit their budget? Rep. Jason Smith (R-MO): You would need to ask the budget committee. Rep. Joe Neguse (D-CO): I would need to ask the budget committee. Mr. Estes. When did the Republicans submit their budget? [Pause] Only in the Rules Committee, by the way, could a witness lay blame at the president for being a few weeks late in submitting his budget when his party hasn’t submitted a budget, period.
1:06:45 Rep. Brendan Boyle (D-PA): We also run the risk that we will one day not be the reserve currency of the world. The reason why our interest rates are so low comparatively, is because we are a safe haven for investment for the rest of the world. These sort of antics increasingly bring that into doubt whether or not folks will get their money, the folks who are lending to us.
1:24:15 Rep. Teresa Leger Fernandez (D-NM): Now, Standard and Poor’s, they downgraded our credit rating. Have they increased that credit rating? Rep. Brendan Boyle (D-PA): No. There are three credit agencies Standard and Poor’s, which was the one that downgraded us in 2011, never reversed their downgrade. And frankly my concern and the worry right now is that the other two credit agencies will now follow suit, given the events of the last couple of months, which obviously look very much like 2011 all over again.
1:50:55 Rep. Jim McGovern (D-MA): I continue to be stunned by the fact that when I look at this deal, which focuses on discretionary funding, that the people who seem to be asked to do the most or to absorb the hits the most are the people that least can afford it. The military budget is part of this discretionary budget, it’s over 50% of the discretionary budget. The United States spends more on national defense than China, Russia, India, Saudi Arabia, United Kingdom, Germany, France, South Korea, Japan and Ukraine combined. And yet, if this moves forward, we see an increase in defense spending. I mentioned in my opening remarks, I don’t know how many of you saw the 60 minutes piece the other day, I mean, we all know, of the cost overruns in the Department of Defense. I mean, the idea that we’re spending $10,000 for a $300 oil switch. I mean, it’s been there for a long time, and yet, we seem unable to want to grapple with that waste and those cost overruns. I don’t know if it’s the defense lobbyists or the campaign contributions or whatever it is, but somehow, when it comes to the military budget, you know, not only are we not holding them accountable, but you know, we say we’re going to increase it even more, even more, we’ll give you more.
2:57:40 Rep. Chip Roy (R-TX): Look, I’m for NEPA reforms 100%. We need them for road projects, transportation, particularly for our energy industry. But my concern here that we’ve got language that none of us have fully reviewed, going through the committees of jurisdiction that has been adopted, that I’ve got colleagues texting me and saying they’re not 100% sure if that language is good or bad for the purpose intended. I’ve got colleagues on both sides of the aisle that have raised those questions. And so the purpose intended, of course, is to streamline projects, whatever those projects may be. But I’ve got a text right here from GOP colleagues saying, Well, I’m not so sure that these will actually do what we think they will do, to streamline said projects. And in fact, a former high up in the administration, in the Energy Department under the Trump administration, just validated that concern by one of my colleagues. Yet we are putting forward this measures saying some grand improvement with respect to NEPA, that that’s somehow something we should be applauding when it’s not the full package of H.R. 1, which had gone through committee. And importantly, the one thing that I think is 100% clear, is that this bill fails to include even the most basic reform to President Biden’s unreliable energy subsidies that were put forward in the so called inflation Reduction Act for the wealthy, elites, corporations, and the Chinese Communist Party just to be blunt. And frankly, it ensures that permitting reform will likely benefit renewables the most. Basically, if you’re a government that is subsidizing the crap out of something, in this case, unreliable energy, giving massive subsidies to billion dollar corporations, giving significant subsidies to families that make over 100,000, 300,000 for EVs, because you’re chasing your your dreams of, you know, a fossil fuel-less world. You’re going to absolutely decimate our grid because you’re not going to have the projects being developed for the gas and the coal nuclear that are actually required to keep your grid functioning. But yeah, that’s what we’re doing and I just for the life of me can’t understand why we’re applauding that.
3:15:50 Rep. Jason Smith (R-MO): So we’ve been asking for the IRS to give us a plan of how they wanted to spend the additional $80 billion that they had. They finally gave that to Congress about six weeks, eight weeks ago. They broke down how they’re spending the $80 billion: $1.4 billion of it was for hiring more agents and what the bill before you does, it eliminates that $1.4 billion for this year.
May 25, 2023
May 24, 2023
May 21, 2023 60 Minutes
May 17, 2023 Senate Budget Committee
Bobby Kogan, Senior Director, Federal Budget Policy, Center for American Progress
Bruce Bartlett, Former Deputy Assistant Secretary for Economic Policy, United States Department of Treasury
Samantha Jacoby, Senior Tax Legal Analyst, Center on Budget and Policy Priorities
Dr. Adam Michel, Director of Tax Policy Studies, Cato Institute
Scott Hodge, President Emeritus & Senior Policy Advisor, Tax Foundation
32:25 Bobby Kogan: Today I intend to make two points. First, without the Bush tax cuts, their bipartisan extensions, and the Trump tax cuts, the ratio of debt to GDP would be declining indefinitely. And second, our rising debt ratio is due entirely to these tax cuts and not to spending increases. Throughout this testimony, When I say spending, I mean primary spending, that is spending excluding interest on the federal debt, and every mention of revenues, spending deficits, and debt means those amounts as a percent of GDP. Okay, according to CBO primary deficits are on track to stabilize at roughly 4% over 30 years, high enough to cause the debt to rise indefinitely. The common refrain that you will hear, that I heard when I staffed this committee, and that unfortunately, I expect to hear today, is that rising debt is due to rising spending. Revenues have been roughly flat since the 1960s and while spending was also roughly flat until recently, demographic changes and rising healthcare costs are now pushing the costs up. These facts are true. Our intuitions might reasonably tell us that if revenues are flat, and spending is rising, then the one changing must be to blame. But our intuitions are wrong. In CBO’s periodic long term projections earlier this century, spending was projected to continue rising, but despite this CBO routinely projected long term debt stability, It projected revenues to keep up with this rising spending, not due to tax increases, but due to our tax code bringing in more as our country and the people in it prospered. That prosperity results in both higher revenue collection and higher real after tax income for the people whose incomes are growing, it is a win win. In other words, we used to have a tax system that would fully keep pace with rising spending. And then the Bush tax cuts were enacted and expanded, and then on a bipartisan basis eventually made largely permanent in 2013. Under the law dictating CBO and OMB’s baseline construction, temporary changes in tax law are assumed to end as scheduled. In practice this meant that CBO is projection showed the Bush tax cuts ending on schedule with the tax code then reverting to prior law. 2012 was therefore the last year in which CBO is projections reflected the Bush tax cuts expiring. Yes, CBO’s 2012 long term projections showed rising spending, but it also showed revenues exceeding spending for all 65 years of its extended baseline with indefinite surpluses, CBO showed debt declining indefinitely. But ever since the Bush tax cuts were made permanent CBO has showed revenues lower than spending and has projected debt to rise indefinitely. And since then, the Trump tax cuts further reduced revenues. Without the Bush tax cuts, their bipartisan extensions, and the Trump tax cuts, debt would be declining indefinitely, regardless of your assumptions about the alternative minimum tax. Two points explain this. The first employs a concept called the fiscal gap, which measures how much primary deficit reduction is required to stabilize the debt. The 30 year fiscal gap is currently 2.4% of GDP, which means that on average primary deficits over 30 years would need to be 2.4% of GDP lower for the debt in 2053 to be equal to what it is now. The size of the Bush tax cuts their extensions and the Trump tax cuts under current law over the next 30 years is 3.8% of GDP. Therefore, mathematically and unequivocally without these tax cuts, debt would be declining as a percent of GDP, not rising.
41:45 Bruce Bartlett: The reason I changed my mind about taxes and decided that we needed tax increases happened on a specific day that I’m sure Senator Grassley remembers, if nobody else. And that was the day in November of 2003, when the Medicare Part D legislation passed, and I was just, you know, at the time, I thought the reason Republicans, and I was a Republican in those days, were put on this earth was to control entitlement programs. And I was appalled that an entirely new entitlement program was created that was completely unfunded. It raised the deficit forever by about 1% of GDP. And I thought a dedicated tax should have been enacted, along with that program, which I didn’t oppose and don’t oppose. In fact, I benefit from it at my age. But I just think that we need proper funding. And that was when I first started saying we needed to raise taxes, because we just can’t cut discretionary spending enough to fix the problem. And I think this is the error of the House budget, which cuts almost entirely domestic discretionary spending, doesn’t even touch defense, and I just think that’s extraordinarily unrealistic and an unserious approach to our deficit problem. We simply have to do something about entitlements. If you’re going to control spending, control the budget on the spending side, I don’t think we’re going to do that. I think we need a new tax. I have advocated a value added tax for many years, as a supplement to our existing tax system. It creates, you can raise a lot of revenue from it every virtually every industrialized country has one. The money could be used to fix things in the tax code, as a tax reform measure. Once upon a time in the 70s, and even the 80s, it was considered the sine qua non of Republican tax policy, because it’s a consumption based tax system, a flat tax, and now many Republicans are in favor of something called the Fair Tax which is very similar except that it won’t work. Administratively it’s poorly designed. The Value Added Tax will work and that’s why it should be a better approach to these problems.
49:15 Samantha Jacoby: Wealthy people who get their income from investments accumulate large gains as those assets go up in value over time, but they won’t owe income tax unless they sell their assets. And if they never sell, no one will ever pay income tax on those gains. That’s arguably the biggest flaw in the tax code. Policymakers should consider a tax like President Biden’s budget proposal to enact a minimum tax on very wealthy households. This would treat unrealized capital gains, which is the primary source of income for many wealthy households, as taxable income instead of letting income accrue tax free across generations.
54:15 Dr. Adam Michel: Keeping government small is the best way to ensure that the American people can continue to prosper.
58:45 Scott Hodge: There are many elements of the tax code that benefit the wealthy and big corporations, I absolutely agree, and the inflation Reduction Act is the most recent example of corporate welfare in the tax code.
1:01:00 Samantha Jacoby: So the the 2017 law, it dramatically changed the way that foreign profits are taxed of multinationals. And so what happens now is large corporations who have big, big foreign profit centers, lots of foreign profits overseas, they pay a lower tax rate on those foreign profits than they do on their domestic profits or purely domestic businesses pay.
1:02:55 Bruce Bartlett: And one of the things I tried to do in my prepared testimony is look at what has actually happened in the seven years since then. And very few studies, I know, some of the tests, the footnotes and my colleagues testimony or to our projections based on studies were done in 2017, 2018. I tried to find things that were written more recently, perhaps, or preferably, I should say, in the academic literature, which I think is more substantive and more dependable. And I looked at peer reviewed journals, and the data that I could find showed no macroeconomic impact whatsoever. It didn’t raise growth, it didn’t lower growth. And I think I concluded in that — Sen. Sheldon Whitehouse (D-RI): It did shift wealth, correct? Bruce Bartlett: Excuse me? Sen. Sheldon Whitehouse (D-RI): It did shift wealth. Bruce Bartlett: Oh, absolutely. No question about that. But I’m more interested in the macroeconomic effect on investment and growth and employment. And I would just close by saying that if a tax cut had no positive impact, then it can’t have any negative impact if you get rid of it. Now, you may not want to for other reasons….
1:05:25 Bobby Kogan: Right. So our demographic changes and rising healthcare costs are the reason that spending is increasing. If you break spending into two categories, Medicare, Medicaid, Social Security, everything else, including the everything else entitlements, the everything else is shrinking as a percent of GDP and it’s the Medicare, Medicaid and Social Security that are growing. And they are growing not because they are getting more, they’re doing more, it’s not because we’re giving more and more to seniors, and to extremely poor people, but because it costs more to do the same. And that is the rising that is the demographics is changing the ratio of non workers to workers and there’s also the rising health care costs. And so what this means is that if you want to spend less, you are necessarily saying that future seniors should be getting less of a benefit than they’re currently getting. That’s the only way to do it. Since that’s the portion of the budget that’s growing, if you want to cut that, you have to say that the current amount that we’re doing for Social Security recipients, the current amount that we’re doing for seniors, the current amount that we’re doing for people on Medicaid is too much, and future people should be having less. That’s the only way to do it. And, you know, the very nice thing that I had though, ii my testimony, we used to have a tax system that despite that rising, we keep up with that, and now we don’t.
1:15:50 Bruce Bartlett: Well, first of all, I think in terms of tax shelters and tax evasion and extreme levels of tax avoidance, the problem isn’t so much with the law as with the enforcement. And as you know, it’s been the policy of Republicans to slash the budget of the IRS in real terms, for many years, which is a way of giving, privatizing tax avoidance to rich people and the rich individuals have the greatest power and ability to evade taxation. And I think it was really wonderful that the Congress increased the IRS budget, and I think it’s just the height of absurdity that one of the major elements of the House Republican proposal is to slash the IRS budget again, even though the CBO has said this is a revenue losing proposition.
2:06:40 Bruce Bartlett: I think there’s absolutely no question that the debt limit is unconstitutional, and not just under the 14th Amendment, section four, but under the general powers of the President. I mean, one of the things that I will point out is that the debt limit is a very serious national security issue. A huge percentage of the national debt that is owned by foreigners is owned by foreign central banks. They are not going to be happy if their assets are suddenly worth a great deal less than they thought they were. I think the President has full power within his inherent authority to simply declare the debt limit null and void. And I would point out that it’s not a simple question of whether you just break the debt limit. I think a lot of people, even on this committee, forget the impoundment part of the Budget Act of 1974, which says the President must spend the money that is appropriated by law, he doesn’t have the choice not to, which is what some Republicans seem to think that he can do. And he lacks that power. So I would agree that the President has that power. I wish he would use it. I wish it as sincerely as anything I believe in life. Thank you.
May 16, 2023
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