House Speaker, Kevin McCarthy, converted his paper-thin Republican majority in the US House of Representatives into a statement of resolve. At the same time, he breathed some life into a political party on life support.
In recent years it has been hard to know what principles centered the Republican Party. Wedge issues? A personality cult? At its 2020 Convention the Party said: “The Republican National Committee has unanimously voted to forego the Convention Committee on Platform, in appreciation of the fact that it did not want a small contingent of delegates formulating a new platform without the breadth of perspectives within the ever-growing Republican movement.” Translated: Then President Donald Trump didn’t want a policy-based Party nor did he want distractions.
The Republican Party during much of my lifetime stood (although sometimes shakily) for fiscal integrity—the need to balance expenditures and receipts. Predictably, its leaders found that from time-to-time balancing accounts was unpopular.
Perversely, cutting taxes regardless of budget deficits became a first principle in the Party. It was called supply-side economics. The theory: cutting taxes spurs growth and therefore produces more tax revenue on lower taxes.
There is no doubt that taxation can hurt business and thus job creation, wage growth and capital investment. If you doubt it, take a look at high tax states and their loss of population and businesses. But there is also no doubt that when there is little to no discipline on the expenditure side there will ultimately be perverse consequences—higher taxes or more debt (given our entitlements commitment, cutting costs to arrive at a balance is not in the cards). Our current debt: $31 trillion.
The Republicans numerically control one half of one branch of the government. And this is an unruly Party caucus with a dozen or more performative members. It took McCarthy 15 ballots to be elected.
And back once more to the $31 trillion dollar debt. We can’t fathom that much debt and that is a huge problem. “One trillion is equivalent to one million million).” When we can’t fathom something, the something loses its bite.
The ultimate actor in this face-off is the leader of the executive branch—Joe Biden. In effect, President Biden says I will not negotiate over expenditures until you give me the authority to issue more than $31 trillion dollars of debt.
The President, unfortunately, has never led an organization that was required to balance its accounts. He graduated from law school, practiced law for a few years, was elected to the New Castle Delaware city council in 1970 and two years later to the US Senate. He was 29.
Turning back to Kevin McCarthy. I am not enough of a pragmatist to be a fan of the Speaker. His only path to the leader’s position required unfortunate alliances with performative politicians whose very presence in the Congress harms its standing. But I am now pleased that he and his caucus will force the President to pay attention to our public debt.
The last President to preside over a balanced budget was Bill Clinton with the help of the House Speaker, Newt Gingrich. The year: 2001. His political advisor James Carville quipped: “I used to think that if there was reincarnation, I wanted to come back as the president or pope or as a 400-baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.” He was certainly right; the bond market keeps score.
Unpacking that nugget of wisdom, I would offer the following. If the US dollar is to remain the primary global currency of exchange, a huge advantage, balancing our accounts must be an enduring principle. It won’t always happen but try we must. If the principle continues to be victimized by populist politics (left or right), our nation’s cost of borrowing will make today’s fiscal impasse seem minor.
We need to also keep in mind money’s relationship with freedom. We can understand this by looking back at our lives. When we were youth without much debt, many enjoyed unfettered freedom. But if we became parents with children, well you know the result. If we want the freedom to respond quickly to future challenges, we must be freed of a debt level that limits our options. In effect, our country’s capacity to borrow at favorable rates is our reserve fund.
President Biden says he wants four more years. And he has now said he will meet with legislative leaders on May 9th. Good. Engage. Bargain. That is what the office requires. Presidents do not have to get in the trenches but they have to take the field.
Al Sikes is the former Chair of the Federal Communications Commission under George H.W. Bush. Al writes on themes from his book, Culture Leads Leaders Follow published by Koehler Books.
Deirdre LaMotte says
We need to pay our dept. the Republican Party had no problem under Trump demanding roll backs of any kind. And he exploded the dept. Republicans are just demagoguing and have proposed no budget to repair the huge deficits they created in 2017. Which is driving this dept.
We spent the money, largely on tax cuts to the richest Americans. Pay the damn bills and increase revenue.
William Keppen says
I agree, but the discussion has to include an evaluation of taxation policies and collections of taxes due.