The Good, The Bad and the Interesting: a Debt Ceiling Deal
Debt Ceiling Kicked Down the Road and Politicians Agree to Govern Badly
Summary
A Debt ceiling deal was reached in principle. It extends the debt ceiling until after the election cycle. To cut the deal, the President and Congress made some sausage with minor bad governance policies.
In all it avoids a major debt ceiling debacle, for a mixture of bad governance policies and political posturing.
The Deal
We have a deal! Maybe.
The agreement has been reached ‘in principle.’ It still requires approval from the House and Senate, and there are bound to be disagreements from both left-leaning and right-leaning constituencies. Consequently, the final details of the deal could differ from what is currently being reported, as it has not undergone the legislative process yet. This deal may be a strange case that passes with a bipartisan alliance against significant minorities in both parties who are against this deal–such an alliance in the current American political environment is fragile and very rare.
What’s in the deal
To cut the deal, the President’s team agreed to not raise non-defense discretionary spending in the next fiscal year, to clawback covid 19 relief funds, cut IRS funding to modernize their systems, restart student loan payment (but it does not touch the student loan relief issue that is before the courts), changes how environmental reviews are conducted, and expedites an energy pipeline in West Virginia.
The Good: The deal suspends the debt ceiling for the entirety of 2024, eliminating the issue as a political hurdle during the election season. This extension can be seen as a negotiation win for the President's team. However, let's not stand up and applaud Congress for merely acting responsibly on one issue for a year and a half.
The Bad: The Covid funds clawback sounds like it's reducing government waste; but those funds were already earmarked towards native health systems and IRS tech upgrades. These may not be flashy initiatives, but they are essential for good governance in the long term.
Eliminating work requirements would be great government policy for pretty much all of our government policies targeting the poor, and especially for our meager food stamp policies. Work requirements increase the cost of running a program, while decreasing the amount of people who get awarded needed food, homeless people see a drop in food rewards by 53%. Notably there is no increase in Employment when a work requirement is added to the program –if you want people to work, you need to give them jobs, not starve them. Even when the policy is supposed to make exceptions for people, such as homeless teens, the regulatory hurdles ensures that marginalized people fall through the cracks. The potential savings from the work requirement policies is likely in the millions rather than billions.
This approach represents a flawed policy both in terms of economics and morality. As the richest country in the world, it is not financially burdensome to ensure that every citizen, from the President to the child of a homeless drug addict, has access to food every day. I am against adding a work requirement to SNAP and would rather have seen all existing work requirements removed from this program.
Increasing funding for IRS audits yields far more money than is spent on the audits. Our IRS is currently unable to audit wealthy taxpayers adequately, as evidenced by the Panama Papers scandal.
Further, our Internal Revenue Service’s technology is already severely underfunded. Some of its key programs are 50 and 60 years old. It has no unified system to look everything and everyone up. The IRS really needs that extra money to fix things up. Reducing funding for IRS technology is likely to be more expensive to America in the long run. It's not a huge number in the scope of our Federal debt and without better systems, the IRS will continue to need a large staff just to maintain running ancient and inefficient systems.
A final concern is that the deal itself will pave the way for future political posturing around the debt ceiling. This is valid, and I do not like the dynamics that it creates. Now that I have noted it, I will leave it to the political pundits to discuss this ad infinitum.
The Interesting: The West Virginia pipeline comes with an overhaul to environmental reviews that limits the time the government has to conduct them to 2 years and limits their page length. It also provides for studies on power transfer between major grids and a tiny incentive towards storage. I give weight to the environmentally minded who correctly say that this could limit hearing community concerns and push through environmentally hazardous projects. I come down in favor of this proposal on balance because environmental regulations in America far too often destroy much needed energy infrastructure projects. America is in need of significantly more energy infrastructure, and on balance, I am in favor of this part of the deal.
The Doesn’t Matter: The student loan repayments were going to restart anyways. Biden had announced they would, and Republicans can claim it's a win. This part of the deal changed absolutely nothing about citizen’s lives.
Finale
I’m glad a deal got done. For all that I don’t like about the deal, it pales in comparison to a no-deal debt ceiling breach. It also does not cut some of the things I was deeply concerned would be demanded to be cut back, especially veteran healthcare funding or military support for Ukraine. Its nothing to celebrate, but should it pass, our government will keep on plodding through.
Content on the Debt Ceiling:
Idiocracy in Congress: The Debt Ceiling
An Interview with NBER Economist Claudia Sahm on the Debt Ceiling and More
Thank you for reading.
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Edited by @J_prettybuds