And Congressional Republicans are adamant they won’t vote to raise the national debt limit, which is due to be raised this fall or risk a first default on federal bonds, although many of them join Democrats in lifting or suspending it three times during the Trump administration.
“Republicans will not facilitate another reckless and partisan fiscal and budget frenzy,” Senate Minority Leader Mitch McConnell tweeted Wednesday, rejecting a personal appeal from Treasury Secretary Janet Yellen to help raise the debt ceiling .
He pursues a four-decade model of Republican presidents racking up large budget deficits and leaving an economic and fiscal mess that a Democratic president must try to clean up. Think of Bill Clinton after deficits skyrocketed under Ronald Reagan and George HW Bush because of tax cuts and a build-up of defense; Barack Obama after further tax cuts, an expansion of Medicaid, two wars and a financial crisis under the leadership of George W. Bush; and now Biden, after even more tax cuts and a pandemic under Trump.
“Republicans are absolutely guilty of hypocrisy in that they focus on debt under Democratic presidents and then rack up spending under Republican presidents,” said Brian Riedl, former senior economic official for Republican Senator Rob Portman of Ohio and now a senior member of the Manhattan Institute, a free market think tank.
But he also slammed Democrats for claiming responsibility for deficit cuts that occur when an economic downturn reverses under their watch due to factors beyond their control. Clinton has been the only president in the past 40 years to preside over a fall in the national debt as a percentage of total economic output. Debt increased by about $ 9 trillion under Obama, who inherited a deep recession.
“Yes, Democrats come to power with a bad hand, but they are also quickly capturing much of the natural growth of the business cycle that occurs with or without their policies,” Riedl said. “Both sides run deficits and then blame the other.”
The national debt has tripled since the 2008 financial crisis and continues to climb rapidly due to the pandemic, which triggered billions of dollars in federal bailout spending and lowered tax revenues. The non-partisan Congressional Budget Office projects a budget deficit of $ 3 trillion for this fiscal year, which ends September 30. That would bring debt by the end of this year to 103% of total economic output, or gross domestic product, just behind the record. 106 percent right after the end of World War II. The average debt-to-GDP ratio over the past 50 years has been 44%.
The fiscal position is expected to improve over the next few years as the economy recovers from the pandemic and interest rates remain low, the CBO said. But then the deficits will start to climb again, fueled in large part by increased spending on Social Security and Medicare for the growing number of aging Americans. By 2031, the debt-to-GDP ratio would reach 107 percent, rising to a staggering 200 percent by 2051, according to CBO projections.
Prospects for seriously tackling the debt look bleak, said G. William Hoagland, a former senior Republican Senate official on the budget committee.
“Sometimes we create these expectations in the minds of the public, especially during campaign seasons, that we can do it all at no cost and sort of it’s a free lunch,” said Hoagland, vice president of the Bipartisan Policy Center think tank. “Trump was terrible about it. He was going to balance the budget in four or five years. I don’t know where he went to school for his calculation, but what he promised was just absolutely impossible and yet people bought him.
Despite Trump’s promises, debt rose during his presidency – even before the pandemic wreaked havoc on the economy – in part because of the 2017 tax cuts, which the CBO said would cost $ 1.9 trillion. even over 10 years after taking into account additional economic growth.
As Republicans drafted tax reduction legislation in September 2017, 33 GOP senators voted to increase the debt limit. But this week, one of those Senators, Ted Cruz of Texas, said Republicans have no responsibility to help raise the debt ceiling this fall, even though most of the debt has accumulated. since the last hike in 2019 under Trump.
“I certainly agree that Republicans are overspending too,” said Cruz, who voted against increasing the debt ceiling in 2019. “That being said, what we are seeing from Democrats right now is an order of magnitude different. “
Senator Thom Tillis, a Republican from North Carolina, also voted to increase the debt ceiling in 2017. But he was among 46 senators who signed a letter last month vowing to oppose it now. They argued that Democrats have the votes to do it themselves under the $ 3.5 trillion budget reconciliation bill, which only requires a simple majority to pass the Senate.
“I think everyone cares about debt, same. . . a lot of Democrats, ”Tillis said. “The issues you are currently experiencing are a big difference in spending priorities. “
Democratic leaders in Congress did not include an increase in the debt limit in the reconciliation bill, arguing that there is a bipartisan obligation to increase it.
“Senators from both parties voted overwhelmingly in favor of the many laws that have contributed to this obligation,” Senate Majority Leader Chuck Schumer said Tuesday. “So neither party can wash their hands of the responsibility of paying the bills.”
But Republicans have reverted to the confrontational debt-limit position they took under the Obama administration, when they brought the federal government to the brink of default on two occasions, including a showdown in 2011 that triggered the country’s first-ever AAA rating downgrade.
Harvard economist Jason Furman, who chaired Obama’s Council of Economic Advisers, says the size of the national debt is not that big of a deal because interest rates are historically low. This gives Democrats the ability to borrow for parts of the reconciliation bill that are long-term investments, like spending on free preschool for 3- and 4-year-olds and a no-cost community college of schooling.
“Some of the concerns about the debt and the debt trajectory are overstated given the current and likely interest rate situation,” he said. He estimated that Democrats could justify borrowing between $ 1,000 billion and $ 2,000 billion of the total cost of the bill as long as the money is used for investments like education.
Still, Furman is worried about the increase in the national debt and believes that the Republicans’ renewed attention to it is less a matter of hypocrisy than a fundamental disagreement over priorities.
“I don’t think it’s pure hypocrisy to say debt is okay for something good and it’s not okay for something bad,” he said. “I am in favor of borrowing for good things and against borrowing for bad things. I just have a very different view of what is good and bad than them.