March 7, 2023

In a New York Times op-ed today, President Joe Biden offered the opening salvo in his battle with the Republicans over budget measures. He outlined his promise to make the Medicare trust solvent beyond 2050 without cutting benefits. Indeed, he says, his plan will make the program deliver better value on the money Americans invest in it.

Biden noted that both he and former president Barack Obama signed into law the biggest health reforms since the creation of Medicare in 1965. In 2010, Obama established the Affordable Care Act, more popularly known as Obamacare, extending medical coverage to many for whom it was out of reach. That law significantly slowed the growth of healthcare spending.

In 2022, Biden signed the Inflation Reduction Act, permitting Medicare officials to negotiate with pharmaceutical companies for lower drug prices and capping the costs of drugs for seniors. This measure is projected to reduce the deficit by $159 billion.

Biden proposes to build on those two measures, increasing the scope of Medicare’s negotiations over drug prices, a process he claims would yield $200 billion in savings that he would put directly into Medicare’s trust fund.

He also proposes to raise the Medicare tax rate on earned and unearned income above $400,000 from its current rate of 3.8% to 5%. That money, too, would go into Medicare’s trust fund. “When Medicare was passed, the wealthiest 1 percent of Americans didn’t have more than five times the wealth of the bottom 50 percent combined,” Biden commented, “and it only makes sense that some adjustments be made to reflect that reality today. Let’s ask them to pay their fair share so that the millions of workers who helped them build that wealth can retire with dignity and the Medicare they paid into.”

Biden wrote that his budget would protect Medicare for more than another generation, beyond 2050. In contrast, he pointed out, MAGA Republicans want to repeal the Inflation Reduction Act, getting rid of drug negotiations and price caps.

Biden promised that this week he will release his “full budget vision to invest in America, lower costs, grow the economy and not raise taxes on anyone making under $400,000. I urge my Republican friends in Congress to do the same—and show the American people what they value.”

The circus at the Conservative Political Action Conference and the outrage when House speaker Kevin McCarthy (R-CA) gave exclusive access to 44,000 hours of videos from the U.S. Capitol on January 6, 2021, have taken oxygen away from what amounts to a crisis in the Republican Party.

Republican leadership has vowed to cut the U.S. budget significantly but has also said publicly that it would not touch Social Security or Medicare. (However, former vice president Mike Pence promptly negated that promise when he said, "While I respect the speaker's commitment to take Social Security and Medicare off the table for the debt ceiling negotiations, we've got to put them on the table in the long term.”) Few Republicans will agree to cuts in the defense budget, either.

So McCarthy is in the impossible position of delivering the budget cuts his conference demands without actually having the room to cut in most of the budget. It’s a circle he is unlikely to be able to square.

Biden seems to be pushing the Republicans to release a budget plan not only to illustrate to the American people that for all their grandstanding they don’t have one, but also because he would like to return to a political norm in which parties actually explain how they would address issues, and then let voters choose which approach they prefer. It’s an old model and one the Republicans, who since 1980 have for the most part simply complained about the government rather than offering positive solutions, have no interest in adopting. Worse for them, polls show that the solutions Democrats want are popular, while their own insistence on privatizing everything is not.

Going forward, I suspect we’ll see a lot of distractions rather than an actual budget plan from the Republicans.

While they try to fudge the budget issue, the Republicans are still vowing to refuse to lift the debt ceiling, which is separate from the budget. The debt ceiling is a holdover from the World War I era, when Congress stopped debating which financial instruments the Treasury should use and instead just set an upper limit on borrowing. Raising the debt ceiling does not create new spending; it simply enables the government to pay for expenses already incurred. If it is not lifted, the U.S. Treasury will default. The U.S. has hit the current limit of $31.4 trillion, and Treasury Secretary Janet Yellen is using extraordinary measures to pay bills.

Republicans are eager to pin the growing debt on Biden and the Democrats, but as Jim Tankersley noted in the New York Times yesterday, “Republicans bear at least equal blame as Democrats for the biggest drivers of federal debt growth that passed Congress over the last two presidential administrations.” Since early 2017—the start of Trump’s administration—three fifths of the ballooning new debt was signed into law by Trump, and nearly 75% of it came from bills approved by a majority of Republicans in at least one chamber of Congress. In laws passed on strict party-line votes, Republicans added slightly more debt than Democrats did. Notably, the Republicans’ tax cuts for the wealthy and for corporations under Trump cost at least $2 trillion over time.

Today the Senate Subcommittee on Economic Policy, which sits under the Banking, Housing, and Urban Affairs Committee and is chaired by Senator Elizabeth Warren (D-MA), heard from economist Mark Zandi of Moody’s Analytics. Zandi warned that a U.S. default would “be a catastrophic blow to the already fragile economy.”

As Chelsey Cox of CNBC reported, Zandi explained that “[g]lobal financial markets and the economy would be upended, and even if resolved quickly, Americans would likely pay for this default for generations, as global investors would rightly believe that the federal government’s finances have been politicized and that a time may come when they would not be paid what they are owed when owed it.” Zaidi also warned that, considering how much of the budget is now off-limits, the cuts Republicans promise will be so extreme they will prompt a recession that will cost as many as 2.6 million jobs.

The Republican Party is in its current chaos in part because it has been boxed in by the former president. Trump’s base has forced party leaders to take impossible extremists stands like, for example, a showdown over the debt ceiling. New materials released tonight in the Dominion Voting Systems defamation lawsuit against the Fox News Network confirm that Fox News Channel executives and hosts did not believe that Trump won the election in 2020, although they continued to push that lie on their channel to hold Trump viewers.

But tonight’s material went further, suggesting that some of the hosts who were most vocal in promoting Trump were less fond of him in private. On January 4, 2021, host Tucker Carlson tweeted to someone: We are very, very close to being able to ignore Trump most nights. I truly can’t wait…. I hate him passionately.”

Speaking of Trump’s presidency, Tucker wrote: “We’re all pretending we’ve got a lot to show for it, because admitting what a disaster it’s been is too tough to digest. But come on. There really isn’t an upside to Trump.”

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Notes:

https://www.nytimes.com/2023/03/07/opinion/joe-biden-medicare.html 

https://www.usatoday.com/story/news/politics/2023/02/22/mike-pence-social-security-medicare-debt-ceiling/11322677002/

https://www.nytimes.com/2023/03/06/us/politics/federal-debt-republicans-democrats.html

https://www.cnbc.com/2023/03/07/economists-activists-warn-lawmakers-of-looming-debt-default-.html

https://www.washingtonpost.com/politics/2023/03/07/3-early-takeaways-new-dominion-fox-lawsuit-documents/