Kevin Mccarthy’s Budget is a Godsend, Not Because it Would Substantially Reduce Deficits, but Because it Would Gut the Inflation Reduction Act
Is Kevin Mccarthy growing a spine? Perhaps not, but he has drafted such a formidably intelligent bill, I bet he doesn’t even know how good it is
“What has to happen are conversations, discussions between the speaker and the president, real discussions, not discussions that are held through the media right now,” —Lisa Murkowski Republican Senator of Alaska
“At some stage in the game, the president needs to step forward and work with other elected members of this government,” — Mike Rounds Republican Senator of South Dakota
“Frustration that the American public sector is too large and needs to be constrained more effectively has been a major driving motivation of conservatives for decades. But they have placed their faith in energetic political movements and philosophical appeals to liberty. In a country whose population increasingly mirrors those of other social welfare Leviathans, such approaches have failed. We may pride ourselves on the fact that only 38% of spending in our economy this year will come from governments at various levels, compared to 58% in France, according to International Monetary Fund (IMF) forecasts. But the evidence shows we are merely lagging behind France, not avoiding its path. For every Tea Party, there are three Green New Deals.” “A Strategy for Fiscal Discipline” — Bruce Gilley ~ Law and Liberty
“As my favorite economist Milton Friedman said, inflation is made in Washington,” quoth Kevin Mccarthy, drolly, in a speech to the New York Stock Exchange.
Although I hate Kevin Mccarthy—I would love to meet someone who actually likes him to ask him why (if that person existed); that he epitomizes the moral corruption of the feckless Digital Age Man with zero integrity, against whom I am at all times railing on this blog notwithstanding— I must admit I think he’s done something shrewd, even fair with his modest budget cuts. From the snippets I heard, it sounded like a pretty good speech he gave at the NYSE too.
Introduction
Tied to lifting the debt ceiling either by $1.5 trillion or raising the limit to March 31st 2024, House Republicans under Mccarthy’s uncertain stewardship, under the “Limit, Save, and Grow Act” are proposing: work requirements for welfare recipients on SNAP, TANF, and Medicaid (just twenty hours of work a month for able-bodied men without disabilities; the Cato Institute estimating this could put 1 million men back to work, since so many states during the pandemic waived work requirements for welfare); reversing Biden’s delusional plan to cancel student debt; rolling back his EV tax credits and climate projects; cutting Biden’s frivolous mammoth new funding to the IRS (a populist gesture of condemnation of people like Trump who cheat on their taxes); among other such great blows to his horrific agenda.
Capping discretionary spending at 1% for a decade, the nonpartisan Congressional Budget Office estimates the “Limit Save and Grow Act” will save $4.8 trillion on the debt over the next ten years. It’s not much, it’s not enough, but it’s something. Compare it to Biden’s own budget proposal which is mainly a cheerleading endorsement to simply tax the hell out of the rich and corporations—hardly reducing the deficit at all, with no spending cuts attached, no sacrifices, no rules. While Biden thinks the wealthy should pay for being wealthy, the government should, in exchange, drain revenues with no restraints. Note both budget proposals leave social security and medicare conspicuously untouched.
The Limit Save and Grow Act came on the heels of charges of brinkmanship, with the ego of the Republican party so immense it threatens default allegedly, only because Mccarthy in particular and other Republicans have not agreed to raise the debt ceiling unconditionally, no matter what. In the soberest and most sensible quarters where I get my news— from fiscal conservative Manhattan Institute scholar, Brian Riedl, to former Treasury secretary, Larry Summers, some of the most level-headed of minds sided with Biden in his demands for an unconditional debt ceiling raise. Not I, though.
Where I can imagine how disastrous an unlikely default would be, especially the geopolitical fallout, as Matt Pottinger and Deep Salingh write in Foreign Affairs, “Great Powers Don’t Default,”
“Foreign holdings of U.S. government bonds are up $2.5 trillion since 2011 to $7 trillion in total; of these holdings, at least $1.5 trillion are held by governments that are not members of the G-7 and may have geopolitical motivation to pare their exposure to dollars at a moment of stress. In another difference from 2011, Europe is forging an ever-closer economic union, making euros a more plausible alternative to dollars worldwide. Finally, and most important, the United States is currently spearheading the most severe economic sanctions campaign in history against Russia, deriving its potency in large part from the United States’ ability to exclude a rogue actor from the dollar-dominated global financial system. Washington may need to employ an even more consequential sanctions campaign against Beijing in the event it attacks Taiwan or gives Moscow lethal support for the war in Ukraine.”
I am nevertheless of the conviction that rules need to be established for the budget, and that both sides must compromise to achieve steep spending cuts. And as far as geopolitical risks, I would just argue there’s never a good time to auger default, yet sometimes we do. Indeed, once when America defaulted, it was in the middle of the War of 1812. So why don’t we use our fear of default as a lesson not to spend with no restraint in the first place?
If Only We Didn’t Spend Like Crazy, We Wouldn’t Be Here
In America we are $31 trillion in debt. At the rate we have been adding to the debt, I think I heard on the Wall Street Journal’s Potomac Watch podcast, we will be in $70 trillion of debt by 2050. As the Hoover Institution’s John Cochrane says deficits actually don’t matter if you can still convince investors to borrow and buy Treasury securities. This means a little debt is not an issue. That’s actually normal. We just can’t have too much debt that foreign investors lose confidence that we’ll ever pay it down. I think social security, which is the principal culprit, one way or another has to go, like it or not. Entitlement spending is simply unsustainable, and it’s killing this country’s finances. Ideally I think we should privatize social security and medicare, but if we don’t, then we should at least raise the retirement age to 70, or why not 80 even?
I am entirely uninterested in having this overrated, outdated program come out of my own payroll taxes, as I try to accumulate an income as a young man. I would like the choice to opt out, keep more of my own earnings, and probably never retire. Who needs retirement? I read a very heartening Wall Street Journal interview the other week in which people past middle age were choosing never to retire. These people were proudly saying they would retire when they died. They were saying they would go on working as they always had, because what else would there be to do? It’s a great question. What the hell are you supposed to do when you retire? Travel, as people like to echo vaguely, take a course in something, cultivate frivolous hobbies? Like pickleball or some bullshit? Sounds like a fucking death sentence to me. Sounds to me like one should only choose to retire in order to die much faster and not even necessarily more comfortably.
But I suppose my staunch opposition to retirement whether as a social good or even a desirable chapter of one’s existence is not a popular view. If it were popular then we might hear about cutting entitlements more. Perhaps even though according to polls a sizable share of the electorate wants entitlement reform, it’s only because our leaders want their public pensions too. Whatever the deal is, I condemn the consensus in favor of social security, medicare and medicaid. It should all be discontinued. These programs should be sunset, or wound down over time, and gotten rid of. But if no one wants to cut or reform entitlements—I guess they can cut themselves when we totally run out of federal money for it, which seems to be what our politicians want in any event judging them by their selfish complacency—then, in the mean time, I would be pleased to cut just about anything discretionary. We can hardly afford not to. As the Republicans seem to have noticed, discretionary spending has been hurting us the most over the last couple years, which is why the “Limit Save and Grow Act” is supposed, and projected, to return us to the level of spending growth at fiscal year 2022.
How What the Democrats Are Demanding is Crazy, Illiberal, Irresponsible and Unfair
And, under these current fiscally extravagant circumstances, I actually consider it unreasonable and authoritarian, Trumpian even, for a president insolently to demand the other party submit to raise the debt ceiling, no matter what, without conditions, and pressuring them to stay out of the way of the current administration’s agenda. Even when, as Biden has, that administration has spent an ungodly $6 trillion in just two years in office.
I would ask, moreover whether risking a default to stabilize the deficit isn’t worth it to stop running these massive deficits, which would bring us closer to further much deeper deficit problems in the future, making it harder to correct the longer we put it off. I say if we’re going to spend this much as we have been, rather than prevaricate and kick the can of our looming fiscal insolvency down the road—then we should come to a sensible agreement to cap, cut, and limit spending now, as soon as possible.
That is not only a fair view I think, but it is reasonable. That Kevin Mccarthy is taking the debt ceiling “hostage,” agreeing only to raise the debt on certain, decidedly modest conditions, in my opinion, seems like the rational thing to do. Yeah from the perspective that Mccarthy is even conjuring mental images of a catastrophic default, and apparently coercing Biden to make deals with unprogressive Republicans, it is diabolical indeed. But I would argue that’s what it’s come to. Sorry. With the last two or three administrations, from Obama through Trump and Biden, as America went down this dark populist road, the deficit has ballooned. If you look at the chart of the rate at which government spending and deficits have climbed, it is just monstrous since 2009-2010 until 2023. The line just keeps ticking up and up and up, ever more drastically. And now if someone who’s interest in lowering the deficit is genuine—as I suspect Mccarthy’s is with his history as a tea party type—feels compelled to use the harrowing prospect of a default, to muscle the president to stop spending without any regard for the nation’s future finances, then good for him.
It is a Matter of Patriotic Necessity to Defy the Democrats’ Insolence
He also has to do the unseemly thing to condition the debt raise on budget cuts. Democrats say they want him to pledge to raise it no matter what; afterward they’re open to negotiate. It’s a very good bet they’re not telling the truth. They want Mccarthy to raise the debt level, only not to offer Republicans any spending cuts later. Democrats wouldn’t pretend to be so appalled at Republicans using the debt as leverage, if they would ever concede to make any cuts otherwise. If they considered budget cuts reasonable, then they would have no cause to be so appalled. Which underscores the more the reason we really urgently need to make federal spending cuts that Democrats are at once this cavalier about federal spending over the last ten years, and that they are this adamant that unless Republicans just submit them, they’re being crazy. That is crazy.
If Biden Refuses to Negotiate with Spending Cuts, then he is Mongering Debt Default, too, to Protect His Progressive Agenda
It’s not Mccarthy’s fault that things have come to this; that he feels like this is necessary. If you want someone to blame it is the last decade of heedless executive fiscal waste that is to blame. First that we do nothing in the way of entitlement reform, and second that conservatives keep passing unfunded tax cuts, and third that progressives keep passing fiscal stimuluses. It is the combination of both Democrat and Republican fiscal ignorance. It has been getting worse and worse and worse, and under Biden spending has reached a whole new level of executive overreach. It is insane, and it must stop.
The irony to me is if Biden is completely unwilling to compromise in apparent disregard for our deficit or for how he has managed it particularly, choosing to blame the GOP just for asking him to compromise—Biden is the one who’s really unreasonable here. He’s engaging in brinkmanship incidentally just as much as Kevin Mccarthy. Joe Biden is using the debt ceiling and the threat of a default, too, to coerce the Republican party, and the public, to stomach his insane spending and progressive policies, among which is a 1.5$ billion government grant just to plant trees.
Is it nice what Kevin Mccarthy is doing? Is it polite? Is it not rather bold? Yeah it’s bold. Yes it makes me uncomfortable. It should make anyone uncomfortable. But what should make you more uncomfortable is the sheer abandon with which the government is spending and the spiraling deficit, left unchecked—which automatically raising the deficit without condition would do nothing to fix. It would actually just license the next administration to spend just the same, entrenching Biden’s profligacy as a new norm, or perhaps incentivize the next administration to top it. Judging by the way it’s gone up, it’s as if our leaders were competing with each other to break the budget. Trump blew Obama out of the water. Biden now is hitting a home run, spending in 2 years what Trump did in 4. That is to say if we decline to establish budget rules one way or another, then we will establish rules conversely only to spend like crazy. So if anything the Democrat’s kind of compulsive belief never to use the debt ceiling to negotiate, or compromise, incentivizes worse irresponsibility later on, and it is a recipe for future worse disasters.
We Owe Each Other Spending Cuts
Until we add a balanced budget amendment to the constitution, it is our duty as patriots to seek to bring our deficit under control, and to keep our spending on a sound footing. Otherwise at this rate, with these finances were mirroring banana republics in the third world, hopelessly in debt yet spending heedlessly, even at the cost of triggering the worst inflation since the 70s without a care in the world. I read in the Financial Times the other day that now Biden is pledging a billion dollars to third world countries for the sake of climate change, and he is giving $500 million to Lula, the president of Brazil, a highly destructive geopolitical moral relativist, who is not our ally, just to preserve the fucking Amazon rainforest!!
Indeed our current spending isn’t just racking up immense unsustainable deficits, but it is killing our economic growth outlook. Biden’s Inflation Reduction Act alone, for example, is projected to cost over $1 trillion dollars, according to Goldman Sachs. This isn’t just to manufacture electric vehicles, practically militarize the IRS, needlessly destructively subsidize solar, wind and carbon capture technology, and line the pockets of union members as cronyist favors, also add to inflation. Much much worse in my globalist opinion, the IRA is overhauling global supply chains—with what some advocates distastefully call “friend-shoring” or “near-shoring.” In effect, this bill threatens to kill globalization. This act alone is the big reason for the World Bank’s forecast of a new age of record low growth. Sadly the EU (what began as a great neoliberal institution) in reaction, is becoming more and more the United States of Europe Brexiteers and Euroskeptics feared, dismantling their state aid rules during the pandemic for energy subsidies, and imposing incredibly stupid draconian carbon emissions regulations. Biden’s IRA for these reasons, may come to be the defining geopolitical error of our times, much like the Smoot Hawley tariff some economists blame for stoking the nationalism that led to the second world war. This is the primary reason I’m backing Mccarthy and the Republicans here in this debt ceiling fight. If it weren’t for my fear and loathing of the IRA, I might be a little more tempted for someone to raise the debt ceiling no matter what. But considering how fearful Biden’s most recent legislation is, not just for America but for the world, and to learn that the bulk of Mccarthy’s proposal is concentrated on gutting the IRA, then count me the hell in. The US Treasury stated a month or so ago they were taking “extraordinary measures” to pay our debts while we have reached the debt limit. This is the way I would describe my justification for Republican spending cuts— Biden’s extraordinary spending, not to mention the geopolitical-foreign policy suicide of the IRA, requires an extraordinary debt-ceiling-leveraging commitment to oppose it…
Conclusion
It’s not because his budget proposal even goes far enough to deal with our issues. To balance the budget and really begin to heal our bleeding fiscal wounds, we need to make cuts to and reform social security. But of course this is, “off the table” as our politicians are for some reason so eager and proud to broadcast their opposition to entitlement reform. But because Mccarthy’s budget can save the world from such severe climate regulations that would certainly strangle growth, and by disrupting global trade by fiat, lead us into an autarky lite setting for trade relations, which is already threatening war between the US and China—I really really hope it succeeds.
The geopolitical justification for the “Limit Save and Grow Act” actually far outweighs the deficit reduction aspect of it. Kevin Mccarthy is the last person I ever would have expected to save the world, which is why the subtext of this newsletter is that I don’t think he even knows how important his spending cuts are, targeting the IRA.
Now I am imploring this bastard to be the ignominious cretinous swamp creature that he is, and force Biden’s hand. You just about can’t find a dumber more ridiculous son of a bitch in Washington. But he couldn’t have conceived a more brilliant bill.
— Jay
Win Mcnamee Getty Images