Debit limit crisis?  We’ve been there, done that.

Tea Party Republicans took control of the U.S. House in January 2011, with a promise to dramatically cut government spending.  When U.S. Treasury Secretary Timothy Geithner announced that the federal debt had reached its statutory limit in May, their strategy became apparent.  House Republicans immediately refused to raise the debt limit unless President Obama agreed to dramatically trim the federal budget.  Negotiations went down to the wire and the nation came so close to default that the U.S. credit rating was lowered for the first time in history.

The result was the Budget Control Act of 2011, which would reduce government discretionary spending (more on this later) by around $1trillion over 10 years, half would come from defense spending and the other half from nondefense appropriations.  It became known as the “sequester.”  Without going into detail, neither party liked the results, particularly defense cuts; so, the sequester was modified by subsequent budget acts. 

2023 is déjà vu 2011 in so many ways.

The president is a Democrat, Democrats control the Senate, House Republicans won’t raise the debt limit unless spending is cut and the nation is recovering from a disastrous situation, just like in 2011.  Back then it was the Great Recession; today the coronavirus pandemic is still threatening.  The U.S. military, however, has much greater challenges in 2023, with Russia waging war on Ukraine and China becoming more aggressive.

There is also another interesting similarity, the George W. Bush tax cuts were set to expire in 2012; former president Trump’s tax cuts for individuals will terminate after 2025.  Remember the ominous “fiscal cliff” in 2012?  Another one is looming in 2025.

About the Congressional Budget Office’s Yearly Baseline Budget.

The following analysis uses projections from CBO’s yearly “baseline” report that was just published.  This document gives a detailed breakdown of federal revenues, spending and deficits over the 2023-2033 period.  These numbers help us better understand America’s fiscal situation, including the two main categories of federal government budget authorizations, mandatory and discretionary.

Mandatory – Automatic programs where most federal dollars are spent.

Mandatory spending is mainly for Social Security, Medicare and Medicaid but a very significant amount of it funds government pensions, veterans’ benefits, farm subsidies and much more.  These dollars touch every level of our society.  Congress legislates these programs that typically have no limits in time or dollars, which is why they’re called “automatic.”  Some of them, like Medicaid, are “means tested,” so that only lower income families can qualify for the benefits.

Discretionary – Programs funded by Congress each year.

Discretionary spending is further separated into two categories, defense and nondefense.  Nondefense is all other outlays to fund government operations and various activities, including K-12 education and highway programs.  The $1.7 trillion budget that President Biden signed in December is the discretionary spending authorized for fiscal year 2023 that ends on Sept. 30, 2023. 

Republicans and some Democrats refuse to cut defense spending significantly.  So, that leaves nondefense spending, which Congress has the most power to reduce.  Over the next 10 years, however, nondefense dollars will only be around 16% of the federal budget, not including interest on the debt; mandatory spending will be almost 70%.  The projected deficit over the upcoming decade, including interest on the debt, is $9+ trillion more than nondefense spending.

Republicans claim they will balance the federal budget, but how?

Well, it is obvious from the CBO numbers that cutting all nondefense spending would fall dramatically short of eliminating the deficits and balancing the budget.  That fact alone tells us that it will be impossible to balance the U.S. budget without large tax increases or massive cuts to mandatory programs, the largest of which are Social Security and Medicare. 

Would Republicans cut Social Security and Medicare?

When President Biden accused Republicans of wanting to cut Social Security and Medicare during his SOTU speech, some of them, like Ms. Greene, loudly called him a liar.  Last June, however, the House Republican Study Committee – which includes 70% of GOP House members – released its “Blueprint to Save America” budget for 2023-2032.  It would reduce mandatory spending over that period by almost $12 trillion, compared to last year’s CBO baseline, including $700+ billion from Social Security, almost $3 trillion from Medicare and more than $3.6 trillion from Obamacare, Medicaid and other mandatory spending.  The Blueprint would also cut taxes by over $1 trillion.

Don’t get me wrong, I am all for reducing federal deficits with tax increases and spending cuts.  Lots of waste in the federal budget can be eliminated, even in mandatory programs.

The catch is, Republicans adamantly refuse to increase taxes on anything; they only want to cut spending.  I believe their hard position prevents any meaningful compromise on reducing deficits.  But even when they control Congress and the White House, Republicans are loath to cut spending significantly, particularly from mandatory programs.  Why?  They fear getting wiped out in the next election.

So, do I believe that some of the more radical Republicans actually want to force a U.S. debt default?  Absolutely!  They won’t succeed, but in their addled minds, they believe that the resulting economic catastrophe would force Congress to make drastic cuts in the federal budget, including to Social Security and Medicare. 

Voters must never forget though – this has been the Republicans’ objective for several decades and it won’t end with this fiscal crisis.