Washington Wednesday: The real debt ceiling conflict

NICK EICHER, HOST: It’s Wednesday the 10th of May, 2023. Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard. It’s time for Washington Wednesday. Today, the debt ceiling.

As you heard moments ago, President Biden met with congressional leaders yesterday to negotiate ahead of an impending default crisis.

This is the first time since February that Biden has met with leaders of Congress to address the issue. Three months ago, House Speaker Kevin McCarthy visited the White House to discuss ways to ensure America continues to pay its bills.

KEVIN McCARTHY: My role right now is to make sure we have a sensible, responsible ability to raise the debt ceiling, but not continue this runaway spending.

EICHER: McCarthy walked away from that meeting without a deal, but he worked with House Republicans to narrowly pass a bill in April to raise the debt limit while cutting spending.

Despite that win, Democrats on Capitol Hill roundly rejected the bill as a bad faith effort by the Republicans to exploit a difficult situation. President Biden promised to veto the bill, and Senate Majority leader Chuck Schumer said it would be dead on arrival in the Senate. It’s currently under review in the budget committee.

REICHARD: That brings us to yesterday, when McCarthy finally returned to the White House. This time joined by Schumer, House Democrat leader Hakeem Jeffries, Senate Republican leader Mitch McConnell.

And like the last meeting, neither side is willing to budge. Democrats can’t live with spending cuts, and Republicans can’t live without them.

EICHER: So what’s really going on here? To find out, World’s Washington D.C. reporter Leo Briceno interviewed economist Stephen Moore. Moore is a Distinguished Fellow in Economics at the Heritage Foundation and previously served as a member of the editorial board of The Wall Street Journal.

Over the years, Moore has seen his fair share of political fights over fiscal policy, and in this case, he says Biden has a weaker position than do House Republicans.

STEPHEN MOORE: Well, first of all, I think that Joe Biden has been really one of our most financially reckless presidents in American history, if not the most. I mean, we've spent and borrowed $6 trillion in the last two and a half years. And that's coming out of a crisis. In other words, we should be running surpluses. When Biden came in, that COVID crisis was basically over, we had the vaccine, we were reopening our businesses, people were going back to work, people were getting back on planes and getting traveling again. And so these should be boom times for the United States. And, and instead, Biden came in and spent $6 trillion on all sorts of new government programs and social programs and student loan bailouts and green energy projects and things of that nature that have very low return for the economy. And so I really believe that this is a showdown that has tremendously important consequences, that Republicans have to hold the line here and say, Look, we're not going to give you an unlimited credit card. That's what Biden wants. He said, just let me borrow whatever I want. And I think that is really quite outrageous. I mean, we're the Titanic headed to an iceberg, financially.

REICHARD: So what would McCarthy’s bill do if Biden considered signing it?

MOORE: It raises the debt ceiling, but it says we're gonna save $4 trillion over the next 10 years, we're not going to hire 87,000 new IRS agents, we're not going to give you a $350 billion green energy slush fund to disperse money to all your political contributors. And it also says that, we're going to put a pretty reasonable cap of 1% per year on government spending. And so Biden refuses to negotiate, he is going to bring us right up to the brink. But I have to tell you, I've never seen Republicans as unified as they are right now.

EICHER: Meanwhile, Democrats are just as unified, and they frame the issue this way: that it’s irresponsible to get hung up on spending cuts with the debt collector at the door. But Moore says it’s the Democrats who are playing a dangerous game.

MOORE: Every business man and woman and every head of a household knows you can't just continue to borrow year after year after year. That story doesn't have a happy ending. And it's the same true of government, look at the governments that have tried to spend so much money and just spend and borrow and borrow. And that has always led to a crash in the economy of these countries, whether it's Bolivia, Mexico, Uruguay, Argentina, Venezuela, Greece—this story always has an unhappy ending. So you want to turn the battleship around before it hits the iceberg. And Republicans, I think, have very reasonable demands here. And I think people need to understand that the person, the chamber of Congress that has not passed a debt ceiling bill is the is the Senate, and the Senate is controlled by Chuckie Schumer and the Democrats. So Republicans have done their constitutional duty they passed a budget, they've raised the debt ceiling, Biden doesn't want to do it. So I think the, let's see him pass a budget. Let's see, let's see Schumer get a bill out, I don't think he can do it.

EICHER: Treasury Secretary Janet Yellen has predicted that the U.S. could run out of spending authority as soon as June 1st, raising concerns about what a default would mean for the economy. But based on past experience, Moore says when push comes to shove, the government will pay up.

MOORE: Well, there's not going to be a default on the debt, let me just say that loud and clear, we have money to pay the interest on the debt that's owed. So bondholders should be assured that you're going to be paid. But it does mean we'd have to cut back on some government programs, and there might be some skittishness in the markets. If that happens, that's the point that Biden has been making. Well, if he's so worried about that, why won't he make a deal with the Republicans? He keeps saying Republicans are the danger to democracy. But you know, we have a democratic system of government, we have one chamber of the Congress is held by one party and one chamber is held by the other party. And so, you know, the Democrats say, we're not going to negotiate. I mean, what kind of democracy is that? So, Biden has to sit down and negotiate with the Republicans, he has to come up with a deal, he's going to have to cut back on government spending. And I think those are things that most Americans very much a plot, I saw, the media keeps saying, Oh, 70% of Americans want the debt ceiling to be raised. That's true. But more than half of those 70% want spending cuts, you know, to accompany any increase in the debt. And so you know, a third of Americans don't want to raise the debt ceiling at all. So you've got a situation where I think Biden is playing a very weak hand.

REICHARD: Regardless of the cards Biden or McCarthy have, this is not really a game. It has serious, long-term consequences that, as Moore says, puts America on a path to national destruction:

MOORE: We will not be the world's economic superpower if we continue to borrow and spend money we don't have. And so this is just common sense, folks. We've got to get really serious about the debt. We've got to grow our economy so we have more people working and more people paying taxes, and we have to shrink the government size, which is now you know, $6 trillion a year we're spending. When I first came to Washington, the budget was $1 trillion. So we cannot continue on a path to national financial destruction, it's not going to be you and me that's going to really pay the price for this. It's going to be our children and grandchildren who are going to just inherit a lot of red ink.

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