“The American political class can't agree on a way to raise revenues, nor can it countenance massive spending cuts...in the-play acting over the debt ceiling, we see...infighting over cuts that won't actually happen in order to fix a budget nobody believes can be fixed in the first place.”(1)
The world of high finance is a closed book to many, confusing and frustrating in turn. The built-in complexity seems to have been designed to exclude all but the practitioners and the subject experts. The economy is comprised of so many moving parts that understanding how each affects the whole (and each other) is near impossible for the casual observer. Additionally, matters are frequently unduly influenced by central banks and governments, so events do not simply mechanically play out as one might suppose. The intrusion of the human element is hard to predict, as motivation is often a mystery.
And so, the vast majority of us are on the outside looking in, not recognizing what it is we are watching. Add to that the inevitable obfuscation and misdirection that have been an integral part of any enterprise that is not exposed to sunlight since time immemorial and we can gain some appreciation of how it is that we have been unwittingly led to the edge of the financial abyss so often.
However, certain events appear to be more consequential than others and one of those is only now receding in the rear view mirror – the much maligned debt ceiling 'crisis' in the United States. The usual caveat applies here – we may live elsewhere but, historically (although probably not for much longer) what happens across the pond has a substantial – if not profound – effect on all the rest of us and will also provide one more marker as to the cohesion of the elites and the bankruptcy of the 'partisan' narrative. And, as is usual, things are very much not what they seem in some important regards.
What follows is an attempt to momentarily pierce the darkness and expose what just happened. It's not been easy to get to this point. The seismograph for every other contentious subject shows a bigger signature than that registered here – even the likes of Covid and climate change (neither of which subjects lack technical complexity) always had a cohort of dissenters, if you knew where to look. In contrast, the fine grain detail of the budget workings (for that is where the debt ceiling limit debate leads us) seems to have largely escaped scrutiny and analysis.
It's difficult to divine whether this is due to a genuine inability to understand the subject matter or whether a Uniparty inspired conspiracy of silence is the root cause instead, but there is certainly evidence of a marked degree of obtuseness. Explanations only go so far and no further and the pieces that make up the explanatory jigsaw are scattered far and wide. Allegedly non-partisan search engines (which have proved their worth in the past) now throw up very few websites that diverge from the orthodoxy of any establishment narrative on pretty much any subject you care to mention; pages of results are instead filled with offering from Reuters, various 'fact-checkers', government websites and the major broadsheets. Piecing things together took a lot longer than usual, which is almost certainly the intention. Nonetheless, a picture (of sorts) emerges in the end.
As becomes clear, the debt ceiling is one of three primary elements to budget-making in the US, the others being two types of spending; what they refer to as 'discretionary' and 'mandatory'. As one might expect, the combination of the latter are not supposed to exceed the former. The debt ceiling was supposed to simplify matters because, prior to 1917, every time the Treasury borrowed money, Congress had to pass legislation to authorize it. One might think, given that Congress is supposed to have both the power of the purse and the responsibility of oversight of the executive branch of government, that this process was a necessary one.
But, due to the desire of the progressive government to become embroiled in World War I and its underhand methods of ensuring that's exactly what happened, Congress helpfully shifted to a new system whereby they authorized government to spend money up to a ceiling, rather than risking opprobrium by 'interfering unnecessarily' in the conduct of the war.(1) It's a trend that is still in evidence today; the appeal of convenience masking a deterioration in performance or a derogation of duty.
The debt ceiling cap has never been lowered, even in the brief period when government receipts exceeded expenses; then, it was simply suspended until the government had identified its next deficit-spending target. And, in truth, it's an anachronism that has become weaponized by both parties. The argument is that, if Congress has authorized a level of borrowing, having a second vote on whether to honor the obligation is dumb – which is true and not true simultaneously. True if Congress wasn't being manipulated and effectively by-passed with the budget, untrue and disingenuous if it is. More on that later.
Mandatory spending includes all entitlement programmes such as Social Security, Medicare and a plethora of others, including debt interest. Discretionary spending includes the Defense budget, Veteran's Affairs, the cost of the federal government and the financing of its policy prerogatives. Mandatory funding is supposed to be hammered out in the Budget and discretionary spending is dealt with separately in an Appropriations Bill. At least, that's how its supposed to work. However, there are deadlines and procedures allegedly cast in stone that are routinely ignored. In fact, in over four decades, Congress has only managed to pass the required appropriations measures on time on only four occasions and none since 1997.(2)
Additionally, the mandatory nature of some (most) spending is usually cemented by the original bill that created the programme. This is less than ideal:
“The federal budget is supposed to provide an opportunity for Congress and the President to step back and decide how much the federal government should tax and spend during the following year. In reality, only the one-third of spending that is classified as discretionary is subject to the appropriations process every year. Almost all other programs (classified as mandatory) are left without regular oversight to grow uncontrollably from year to year.”(3)
By marking so many programmes as mandatory (at least 150), Congress is arrogating responsibility and storing up trouble in a very obvious way. In 2008, the first Baby Boomers began collecting Social Security and Medicare benefits; this will raise federal spending by 5% of GDP by 2030 and 13% by 2050.(4) This is unsustainable and will entail either big tax rises (no doubt disproportionately affecting the middle class, as every other tax raise does) or the elimination of most other federal programmes. One suspects that the latter is not an option that any politician wants to take but, unless a large scale generational depopulation can be achieved (not something I'm going to bet against), it's going to be the only one available.
This lack of effective oversight is exacerbated by the treatment given to several discretionary programmes, too; the political class seems to have deemed cutting Veterans' assistance and the Defense budget as two additional de facto mandatory commitments and, although they're linked, the reasoning is different for each. If they were to unambiguously cut funding for military veterans, they would suffer at the ballot box. If they cut military spending, their donors wouldn't even let them get on the ballot in the first place.
The definitions – of what spending belongs in each category – have been uncontroversial until very recently, but aren't now by a very long chalk. As so often, the corruption of the system involves the re-interpretation of words that are not capable of re-interpretation unless everyone involved is prepared to pretend otherwise. Not that any of us are aware of what's happened, because those in the know are keeping shtum for a very good reason. More on that later, too.
The impression we are supposed to form is colored by misrepresentations. We are to understand that the Majority Leader in the House is the one with the power of the purse; we are also given the impression that there is always a debt limit. Neither of these circumstances are true – the debt ceiling can be raised by other means (with the Senate taking the lead) and it has been regularly suspended in the recent past, with no limit set.
The next misrepresentation relates to the assertion that, without a prompt decision on the ongoing debt ceiling, the government will be in default on interest payments on its debt and will, therefore, immediately lose all credibility in global financial circles. The US federal government has already defaulted no fewer than five times (1779, 1781, 1862, 1934 and again – partially – in 1979).(5) State defaults, prior to the establishment of the Federal Reserve, were also plentiful,(6) and yet the US dollar remains the global reserve currency.
In the modern day, the illusion that the country would immediately default on debt payments is nonsense:
“They focus solely on Treasury obligation default. Were they honest, these federal bureaucrats should also discuss default on exorbitant government spending on welfare and entitlement programs. Don't let them misdirect the argument to debt default only.”(7)
Mandatory spending and debt payments can be met out of existing tax receipts, if they were really that concerned about the country's credit rating:
“Federal receipts are now running about $450 billion per month, meaning that after paying $61 billion of interest, $128 billion for Social Security, $26 billion for Veterans and $47 billion for military pay and O&M there would still be $188 billion left to cover at least 50% of everything else. That is to say, no sweat with respect to servicing the public debt, and a lot of sweat among the constituencies that would have had payments delayed or reduced.”(8)
There are other methods available, too. In reality, there is nothing to stop the Treasury instructing the Federal Reserve to credit certain accounts without the need to issue any debt – the choice to match deficit with debt is a voluntary one. Or the Fed could extend a line of credit (an overdraft) to the Treasury. The Reserve bails out other banks; why would it not be able to bail out the government?(9)
Instead, what will almost certainly happen – and is already happening – is a hidden default that, instead of afflicting corporate entities and investors, will instead impoverish the working and middle class American:
“It's clear at this point that the only strategy the federal government ... have for dealing with this is to inflate away the dollar with easy money so as to bring interest rates back down and pay back the debt in devalued dollars. Paying back debts with devalued dollars is a type of default, but this method helps hide the fact. Make no mistake: when the US government chooses to manage its debts by inflating away the dollar, it is defaulting.”(10)
This is the reason for all the long drawn out drama – to inculcate an uneasiness among the population, to use their understandable ignorance against them, to kid them into rooting for a solution that averts the disaster that they are told will engulf them otherwise, even though that solution undermines their own interests and transfers yet more of their wealth to Wall Street et al:
“When the experts who oppose any sort of explicit default insist that default would bring disaster, what they really mean is that it would bring disaster for their friends on Wall Street and in the government. The experts prefer the status quo which is a slow-motion inflationary disaster that's playing out in the household budgets of ordinary Americans.”(11)
And even though the debt ceiling has been raised or suspended seventy eight times since 1960.(12) But none of this information is widely known and re-writing the script isn't in the interests of the ruling class. So, instead, we were treated to some Republican posturing and some Democratic stonewalling. As the former had regained control of the House of Representatives, they were in a position to crystalline their spending demands in a bill, safe in the knowledge that it wouldn't make its way through the Senate, which is Democrat controlled. The words 'politician' and 'virtue signaller' are synonymous, after all.
Somewhat predictably, faced with an open goal, the GOP meekly scooped the ball over the bar. Republicans are reasonable people, you see. They believe in a degree of decorum. Despite the overwhelming evidence that shows that the 2020 election resulted in a coup, they would never be rabid enough to savage the illegitimate President. Therefore, the Limit, Save and Grow Act (2023) was calibrated carefully; it had to be gritty enough to satisfy the Freedom Caucus (and the Republican MAGA base), but not so gritty that it offended the sensibilities of the RINO Congressional majority. At least, that seems to have been the thinking, despite the fact that establishing a negotiating position which is already a compromise is rank stupidity– especially when one holds all the cards.
So, Leader McCarthy proposed a debt limit increase of $1.5 trillion and included a rescission of the funding that had previously been appropriated to pay for an additional 87,000 IRS agents, a repeal of the $1.2 trillion in Green New Deal tax breaks and a cancellation of Biden's student loan bailout scam. Additionally, the bill included the full text of the Lower Energy Costs Act, which strengthens the permitting process for energy projects (fossil fuel as well as 'clean' energy) and, importantly, the REINS Act. The latter has passed the House seven times since 2011 before being repeatedly stalled in the Senate.
And it's not difficult to see why the REINS Act is unpopular in certain quarters, as it would upend the administrative state's ability to legislate from the shadows. Currently, provided legislation doesn't specifically forbid a course of action, the executive branch of government can pretend that Congress is fine with all manner of intrusive rules and regulations that embellish the law, as written. Otherwise, Congress would have said that this or that rule was not within the spirit of what was intended.
This is, of course, arrant nonsense, presuming (as it does) that Congress is capable of divining precisely what liberties the executive branch will take may years in the future. This interpretation has been succored by what is known as the Chevron deference, a decision by the Supreme Court (which may not survive much longer as SCOTUS is reviewing the decision at present).(13) The REINS Act states that any major agency rules would need to have Congressional approval.
Nominally, in return for allowing the debt ceiling to raise in the short term, McCarthy's bill also stipulated a saving of $4.8 trillion over ten years, which sounds promising. But, these people are politicians, and the 'ten year savings' scam is one of their favorites:
“Whenever the chattering classes talk about cuts, it’s only about cuts over the course of 10 years. Which is a dodge, a fraud. Partly because most of the supposed cuts will be scheduled for the end of the period, but also because new programs, new emergencies and hidden contingencies are guaranteed to creep in, offsetting any announced cuts.”(14)
Additionally, these are rarely binding and there are always built-in workarounds. But the biggest problem with the Limit, Save and Grow Act was its acceptance of the bloated federal budget in the first place. Prior to the 'pandemic', the overall budget was somewhere in the region of $4 trillion; $4.2 trillion in 2017, $4.1 trillion the next year and $4.4 trillion in 2019. The economic own goals of lock-downs and other associated policies ensured that the 2020 and 2021 budgets were $6.5 trillion and $6.8 trillion respectively (not to mention the assorted Supplemental Acts that added trillions more to the federal deficit. But now, of course, the alleged emergency is over, so one might think that the Republican opposition would insist on a return to the baseline. After all, what possible justification can there be for a 40% growth in government? But no such demand was made. When American politicians use the word “cuts” they actually mean “increasing the deficit at a slightly slower rate”.
Figure 1
Figure 2
The year 2020 is, therefore, enshrined as a step-change in federal spending; the second in a dozen years, as the previous engineered crisis (the Global Financial Crisis) masked another transformation. This can be identified with reference to the General Fund, the account that pays the expenses and expenditures of all federal entities:
“In the 22 years from 1986 through 2007, the General Fund's daily balance averaged $5.8 billion, and its maximum daily average during a single week was $32.9 billion....In the period from 2008 through 2016, the daily average was multiplied more than 22 times, and the maximum average for a single week was multiplied 13 times. From 2017 through 2022 the daily average was multiplied more than 88 times, and the maximum was multiplied more than 55 times.”(15)
Quite where it all goes is anybody's guess – since at least 2018, the Fiscal Service in the Treasury has failed its yearly audit, thus ensuring that Congressional oversight is impossible. We do know that
“...17 large federal agencies just admitted to $247 billion in Improper and Mistaken Payments. They paid the wrong person, the wrong amount, or under the wrong set of rules: That’s a quarter trillion dollars last year and distressing incompetence. That misfeasance within the 17 largest federal agencies cost every man, woman, and child $818 last year.”(16)
That's not the worst of it. Since 2004, that number is $2.9 trillion.(17) And we also know that the first article of the US Constitution mandates that federal payments are only permitted for lawful appropriations contained within an act of Congress and that a statement and count of both receipts and expenditure is also required.(18) Required, but not always provided. Thus, the federal government is continually in breach of the Constitution and has been for years. But instead of reining in governmental excess, McCarthy's plan called for a topping up of the trough. Once again, very little of this background is known to the wider public, so the focus could still be concentrated on the debt ceiling, while McCarthy enjoyed his moment in the sun. So far, so swampy. We ought to have by now realized that all such scares are simply distractions, designed to draw the eye away from whatever it is that really matters.
Everything in the Limit, save and Grow Act could have been incorporated in a deal with the Democrats. All it would have taken was for McCarthy to stand firm, to refuse to submit to yet more Democrat bullying and name-calling. A sense of righteous anger ought to have been stiffening his spine, also. He had an opportunity to neuter Biden's progressive agenda, one that had been advanced by executive fiat and Congressional malfeasance. Biden has taken legislating from the Oval Office to a whole new level. Frequently, as with Obama, what these orders contain are forms of words that are cut and pasted from bills that have failed to pass muster in Congress.
Provisions of the Green New Deal have been introduced in this fashion as has the order writing off student debt, a gross (and unconstitutional) abuse of process that will cost at least $400 billion; remember, Congress alone has the power of the purse, not the President. Nonetheless, this is a pattern that reoccurs repeatedly; failed legislation being foisted onto the people anyway, via a few strokes of the President's quill.
These abuses should have been remembered and punished when an opportunity presented itself and, in the current Congress, the debt ceiling debate was that opportunity, because the decision was a stand-alone; there was no other mechanism available, other than with the agreement of both houses of Congress. So, a grand game of brinkmanship for sure, but there should only ever have been one winner. I'll come back to this deal, shortly. Firstly, however, a quick look at what really matters, instead.
Because Leftist social engineering always costs money and because the current administration's majority was so slim in the first two years of its existence (the period when all their pet projects had to be bulldozed through, given the likelihood that they would almost certainly lose their majority in the House, despite their well oiled and comprehensive election fraud machine), they had to act swiftly and reprehensibly. That they were able to successfully overcome seemingly unscalable impediments speaks to their corruption and to the collusion of their alleged enemy across the aisle.
To say that there is anything clear-cut about the budget process would be a lie; it's a complete shambles from start to finish. If one party holds a trifecta (the office of President plus a majority in both houses), things are a little less complicated, inasmuch as a debt limit decision is likely to be less antagonistic and a discretionary budget will at least make it out of the lower House to the Senate. But the two parts of the budget still need to accrue 60 votes in the Senate, which necessarily means that radical proposals in the discretionary budget are going to fail; moderation should, therefore, be a given if discretionary funding is to be approved.
However, as we know, moderation is not a characteristic found in great abundance in the progressive caucus. In fact, it is almost completely absent, as the following illustration demonstrates – it shows voting patterns in the Senate. The House Democrats are even further to the left.
Figure 3
And so, they used a tool called budget reconciliation and it is such an obvious workaround that it's surprising that it hasn't been used more in previous years. As previously noted, re-imagining definitions plays a key role, but the process' inception was the product of a modicum of common sense:
“Reconciliation is a legislative process originally intended to reduce federal budget deficits. In 1974, lawmakers decided they had to deal with a recurring problem: If more money was spent than expected or revenues didn’t meet projections, the nation’s deficit grew....so legislators created this process called “reconciliation” that could be used to reconcile actual spending with Congress’ previously adopted spending targets.”(19)
Another of those concessions, rather like the origins of the debt ceiling, that may have seemed like a good idea at the time but, because it necessarily blurred the edges around the limits of government spending (albeit of the mandatory type), it also introduced a degree of ambiguity that hadn't been there previously. The factor that made the process particularly ripe for the exploitation of that ambiguity was the filibuster-proof majority vote provision; while the original mandatory spending budget required a 60 vote majority, the replacement reconciliation bill only needed 51 and while it was hoped that any such adjustment in spending would reduce the federal deficit rather than add to it, there was (and is) no such guarantee.
These arrangements ought still to be an over-riding problem for the radical administration which seeks to 're-make' America, but which doesn't have the Congressional votes to steamroller their agenda through. Discretionary spending in the yearly Appropriations Bill ought to be the bigger battleground, even if a big ticket item like Defense spending has been deemed sacrosanct by both wings of the Uniparty. Mandatory spending should be less controversial, as the programmes being funded are authorized by the original legislation (in most cases); it's simply this year's budget that is up for grabs. Unless, of course, the regime is prepared to resort to an end-run around the Constitution, aided and abetted by the cucks in the nominal opposition and, seeing as this is the progressive Left we're talking about, they are most definitely prepared.
The setting of a federal budget is supposed to work like this. The Budget Resolution, produced as a sort of detailed Presidential wish list for discretionary expenditure by the chairman of the Senate Budget Committee (a resolution, not a law), if passed by a simple majority in Congress, is then parsed to 12 separate appropriations committees to add the meat to the bone and come up with what it's going to cost.
Each prepares a bill; there is then much horse-trading due to the fact that each committee works in isolation and is naturally inclined to overstate its budgetary requirements, safe in the knowledge that every other committee will do likewise. At some point, usually well after the requisite deadline, the finalized bills are all parceled up and included in an Appropriations Bill.
This is then put to the House and, if it passes, it makes its way to the Senate where a super-majority of 60 votes is needed for the bill to become law. In this way a degree of bi-partisanship is guaranteed. The other half of the deal, the mandatory spending, takes places outside the appropriations process and, as previously noted, receives almost no oversight. It is automatically funded, according to its existing terms. Nonetheless, the part of the budget also requires a 60 votes majority in the Senate. So far, so relatively straightforward.
However, budget reconciliation now makes its entrance. Its supposed to relate solely to mandatory spending:
“In short, budget reconciliation is essentially a process which begins with Congress passing a budget plan (or resolution), instructing committees to write legislation that conforms to the budget plan, and consolidating each committee’s legislation into a reconciliation bill. That is, reconciliation bills were intended to “reconcile” Congress’s budget plan with its actual spending and revenue.”(20)
There are rules preventing the passing of legislation via reconciliation, which was recognized as a potential loophole. In particular, there's the Byrd Rule – which is law – which prohibits the majority party from using reconciliation to pass laws unrelated to the budget, laws that would normally be subject to the 60 vote rule (the filibuster).(21) This means that budget increases can only be made to existing budgets in existing departments, effectively, and prevents the passing of any new legislation that would embed them firmly. That's all fine and dandy if the other rules of the game are being followed, but it becomes a mere footnote when they are not.
The key is the word 'mandatory'. Its meaning oughtn't be problematic and yet it has become so. Both parties, as is their wont, have sought to free themselves from the shackles that bind them fiscally and they have done so by the simple mechanism of re-categorizing discretionary spending as mandatory and then gaming the budget reconciliation process to ram the bill through with a simple majority.
They are able to do this because both kinds of spending are conducted under the auspices of federal government entities. Appropriations bills are stuffed full of discretionary budget allocations to the agencies the federal government controls. Mandatory spending is also administered by federal agencies. In reality, telling the two categories apart is straightforward as the discretionary spending isn't authorized by a pre-existing law. But if both parties are committed to ignoring the distinction – and they must be, because neither party has cried foul on the other – and the Senate parliamentarian is prepared to look the other way (which she is) then the system can be gamed. And so, discretionary spending in a budget reconciliation is prohibited, but
“...in many cases, lawmakers could avoid this prohibition by classifying and structuring discretionary spending as mandatory spending – a strategy that was utilized for COVID-19 relief under the American Rescue Plan that would have likely been covered by discretionary spending programs under other circumstances.”(22)
The result is that the administration, if it holds a trifecta, can now pass a discretionary spending bill via the normal means – an Appropriations Act with enough bipartisan support to muster 60 votes in the Senate – and another one tacked onto the mandatory spending bill via budget reconciliation, which only requires a simple majority, which is exactly what they did for the first two years of their reign. The less controversial policies go in the Appropriations Act and the radical polices go in the Budget:
“Congress is deliberately sidestepping the legislative process enshrined in the Constitution, abusing procedural gimmicks to force the radical climate agenda down the American people’s throats through the budget reconciliation package....Many of these provisions seem intentionally designed to increase our dependence on foreign oil, destabilize the grid, cripple the economy, and increase the cost of living, especially for the poorest Americans.”(23)
The evidence that proves the above assertion is easy to find. The failed Build Back Better Act was full of 'climate change' provisions that made their way into the Budget. Clearly, if these measures were put before Congress as potential legislation and were rejected, they are not mandatory spending – they were putatively discretionary spending. They cannot then be repackaged and subject to budget reconciliation, but they were nonetheless.
The subterfuge is further exposed by the distinctions between the two types of financial jeopardy that the federal government seemingly faces on a near annual basis; the debt ceiling theatrical production and the government shutdown. The progressive policies forced through on reconciliation are jeopardized when a new Appropriations Act cannot be agreed (nor can a temporary Continuing Resolution to kick the can down the road a little longer) and the federal government has to shutter for a period of time – and the Appropriations Act, as we've seen, governs discretionary spending. When the debt ceiling is reached, it's the likes of Social Security and interest payments that are threatened, not Green tax code changes and subsidies for solar and wind power.
As well as being a blatant abuse of the democratic process, there are other problems:
“The increasingly common trend of both parties trying to pass large portions of their domestic agendas via reconciliation is yielding a host of unintended consequences, most notably a situation in which legislation is constantly at risk of being undone or undermined when the minority party reassumes power.”(24)
Which ought to be true and would be if elections in America weren't riddled with fraud. While it's difficult to overstate the Leftist capacity for instant gratification, the type that bites them when they lose power and have their pet workaround used against them, it may very well be that, in these end times, the Democrats have absolutely no intention of surrendering power at the ballot box, which would remove any remaining inhibitions in the here and now.
Naturally, the mockingbird media is at pains to run cover, just in case anybody gets a little too close to working it out;
“The big and most obvious limitations are that a budget reconciliation bill is typically only passed once a year, cannot create or change regulations, and cannot create or direct any discretionary spending (things like research, defense, and environmental protection). It can only mess with mandatory spending or the tax code.”(25)
Which is no doubt why the last budget reconciliation – the misleadingly titled Inflation Reduction Act - included $891 billion in total spending.(26) And here's the clincher; the reason why the debt ceiling drama is not entirely what it seems. The budget reconciliation process can be used to raise the debt ceiling, too.(27) And it has been, with the above-mentioned Act. Yes, McCarthy had an opportunity which should have been taken, but when the administration has a trifecta and a compliant Senate parliamentarian, they can simply blow through whatever ceiling has been previously agreed:
“The plan seems to be to enact a massive increase in nondefense discretionary spending with no plan to pay for it – which could cost us hundreds of billions if continued over the decade – while passing a meaningless shell budget to facilitate trillions more in tax and spending changes....it would be the height of irresponsibility for Congress to move forward with hundreds of billions or trillions in policy changes without even trying to pass a real budget plan to show the country how these policies fit into our fiscal future.”(28)
That's about the size of it. Naturally, because the progressives are right and everyone else is wrong (about everything), they abuse the democratic process to achieve their desired result and pursue their agenda come what may. Progressives recognize no process that is sacrosanct. For them, the ends always justifies the means.
And so, back to McCarthy. In the light of all the above, what would be the thing to do? I would suggest that he would be fully justified in holding Biden's feet to the flames. I would further suggest that he owed it to both his own voters and the saps who voted for the cognitively impaired Biden. Here was a chance to slow the progressive juggernaut, to undo some of the more egregious excesses of recent times and force the bulk of his bill on the Democrats. But, inevitably, he didn't. He did what he was always going to do and snatched defeat from the jaws of victory.
We should have seen it coming, but the mistake we continually make when analyzing politics is to think in terms of winners and losers. The perennial losers are us, not one of the political parties. We think that McCarthy was suckered, that he surrendered and got his ass handed to him. I don't think it works like that. In the same way that cops have more in common with villains that they do the general public, so the two wings of the Uniparty – cocooned within the Beltway – are insulated from the voter and in bed with each other.
And the reason is that their donors need to continue to feed on the federal teat; it's not in their interests to reduce federal spending. Ukraine is as good an example as any – Congress supports a war that they have never voted on (simply the usual normalization and mission creep), they then approve massive spending, most of which goes on replenishing the stockpiles of weapons and ammunition that they are sending to Ukraine and, as such, never leaves the country and then that same military industrial complex provides massive campaign funding to members of Congress so that the gravy train never stops. Anyone not prepared to play that game can expect to find themselves primaried, whether they are a congressman or a senator, and all the big money will be spent on the opponent. And if it looks like that still won't be enough, there's always ballot stuffing and algorithms to fall back on.
And so, barely any provision of the Limit, Save and Grow Act survived the negotiations. The REINS Act vanished once more, nearly all the $72 billion to the IRS was retained, along with $1.2 trillion for Green New Deal boondoggles and the student loan bailout. The bill suspended the borrowing cap entirely, clearing the way for $4 trillion of likely spending over the next eighteen months,(29) plus whatever emergency funding will be said to be necessary to combat the inevitable crises that will soon be confected. It also boots the next debt ceiling deadline to after the next election, but before the new administration takes office:
“That purposely puts the nation’s financial future into the hands of a lame-duck Congress, and possibly a lame-duck White House, with no accountability to voters.”(30)
And just to put the cherry on top, it manages to re-define the permitting regime in a way that will simply accelerate the implementation of 'green' energy projects, while doing nothing for fossil fuel energy; not simply a neutral outcome, but a helping hand:
“Both sides seem to be in favor ... but one side is sure to be wrong. With Biden as President, it's easy to see who fell into the trap. Democrats will speed up and approve every clean energy boondoggle imaginable at great speed. Republicans will have every project rejected at great speed.”(31)
Real spending will also go up next year, even though McCarthy is trying to liberally apply lipstick to the pig.(32) So, a complete cluster if you're halfway sensible and a triumph if you're a socialist whose sole purpose in life is spending someone else's money. If further confirmation were needed, three quarters of Democrats in the House voted for it and only four Leftists voted against it in the Senate – it sailed through. And already the Democrats are agitating for more spending:
““That conversation has to consider more than just Defense and Ukraine because there are so many important priorities like border security, disaster relief, and other nondefense items that we should not let be shortchanged,” said Senate Appropriations Chairwoman Patty Murray (D-Wash.).”(33)
And how does America's obsession with economic suicide affect the rest of us? Well, if the country continues on its current trajectory, it will gradually (and then suddenly) transform into a failed state.
Figure 4
The debt payments, combined with the huge increases in mandatory spending that will inevitably be occasioned by ageing Boomers, will bankrupt the state eventually; and it will be obvious that this outcome is inevitable well before it happens. Federal debt will balloon to nearly 200% of GDP.
Figure 5
That's if the federal government can manage to persuade enough investors to continue buying US debt, which is already a fool's errand:
“U.S Treasury bonds are junk, no matter what the rating agencies claim. That's because when it comes to sovereign debt the real risk is #inflation, not default. Anyone buying a 30-year U.S. Treasury is basically guaranteed to lose over 90% of their purchasing power.”(34)
Given the pressure that the dollar is going to be under shortly as the BRICS nations and others de-dollarize, adding huge chunks of debt to the deficit is clearly not the smartest move. Foreign governments own $7 trillion in government debt; for now. The Federal Reserve has been obliged to buy $5 trillion's worth of Treasury bonds, which means that it's effectively both borrowing from, and lending to, itself.(35) And even this dire state of affairs is simply the tip of federal debt iceberg.
The $31 trillion headline debt figure merely reflects Treasury borrowing in bills, notes and bonds. It doesn't include unfunded liabilities, which are financial obligations that has been entered into, but without the funds to pay for them; Social Security and Medicare chief amongst them. Truth in Accounting estimate the true debt to be $157 trillion, nearly 600% of GDP, or $933,000 per taxpayer.(36) Which clearly isn't favorite.
It's as well to remember that the ruling class have never demonstrated any willingness to retreat from extreme positions on any facet of their remake of the United States and, by extension, the collective West. On the contrary; they have built a reputation as double downers. Their commitment to Modern Monetary Theory dictates that they will keep on spending to the bitter end. Perhaps they truly believe in the doctrine – they problem for them (which they are studiously ignoring) is that the rest of the world doesn't. Possession of the global reserve currency has always been a gift that keeps on giving, but its status relies on confidence and that's the one thing they are doing their very best to destroy.
So yes, McCarthy have once again proven that he belongs in the ranks of the invertebrates. Expect him to scold some hapless CNN reporter or put on the transparently fake tough guy act in an attempt to ingratiate himself with the Republican base. But it'll all be for show, as has been the entire debt ceiling farrago. The real battle is against the deeply embedded corruption that pervades the entire budget process.
What we have witnessed is simply an example of what happens when what the ruling class is trying to hide is complicated in nature and can be further obfuscated with minimal effort. It also demonstrates the linguistic elasticity practiced by professional deception artists. But mostly, it's another reminder that there's them and there's us and and they are not in the business of power-sharing. Their club will do what it wants and we'll pay for it.
Citations
(1) https://compactmag.com/article/the-absurd-futile-debt-showdown
(2) https://www.npr.org/2023/05/15/1175733139/debt-ceiling
(3) https://www.heritage.org/budget-and-spending/report/whats-wrong-the-federal-budget-process
(4) https://www.heritage.org/budget-and-spending/report/whats-wrong-the-federal-budget-process
(6) https://mises.org/library/short-history-us-credit-defaults
(7) https://wiki.mises.org/wiki/Panic_of_1837
(9) https://www.zerohedge.com/political/stockman-slams-speaker-mccarthys-rotten-deal
(11) https://internationalman.com/articles/doug-casey-on-the-bankruptcy-of-the-us-government/
(12) https://mises.org/wire/three-lies-theyre-telling-you-about-debt-ceiling
(13) Ditto
(14) https://www.npr.org/2023/05/15/1175733139/debt-ceiling
(15) https://www.americanthinker.com/blog/2023/05/government_by_slush_fund.html
(16) https://www.paymentaccuracy.gov/payment-accuracy-the-numbers/
(18) https://constitutionus.com/constitution/articles/article1/
(21) https://heritageaction.com/blog/reconciliation-and-the-byrd-rule
(22) https://www.crfb.org/papers/reconciliation-101#deficit
(24) https://newcenter.org/budget-reconciliation/
(26) https://en.wikipedia.org/wiki/Inflation_Reduction_Act
(27) https://www.vox.com/22272379/abolish-debt-ceiling
(28) https://www.crfb.org/press-releases/congress-should-pass-budget-not-deem-huge-spending-increases
(34)
(35) https://www.americanthinker.com/articles/2023/05/the_myth_of_the_debt_apocalypse.html
(36) https://www.truthinaccounting.org/about/our_national_debt
Figure 1 https://www.zerohedge.com/political/mcmaken-three-lies-theyre-telling-you-about-debt-ceiling
Figure 2 https://en.wikipedia.org/wiki/United_States_federal_budget
Figure 4 Congressional Budget Office