A High-Stakes Game of Chicken on the Debt Limit

 

Hey, it’s almost Friday! With August days rapidly slipping away, talks are reportedly underway in the Senate about speeding to a final vote on the bipartisan infrastructure bill as soon as tonight or Saturday. That would allow senators to the turn to Democrats’ $3.5 trillion budget resolution more quickly — and thereby avoid losing more of their August recess. The move would require the agreement of all senators, though, and some Republicans are reportedly still asking for amendments, so we’ll see. In the meantime, here’s what else you need to know while wondering where soccer great Lionel Messi will end up.

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Senate Infrastructure Bill Will Add $256 Billion to Deficits: CBO

The bipartisan infrastructure bill currently under debate in the Senate would add $256 billion to deficits over 10 years, the Congressional Budget Office said Thursday. Negotiators had claimed that the $550 billion spending package would be fully offset, but it's been clear that their financing proposals wouldn't cover all the costs in the official score.

Since the result was largely anticipated, the CBO report may not swing many votes — or at least not enough to affect passage of the bill. One of the main Republican negotiators of the bill, Sen. Rob Portman of Ohio, has reportedly been persuaded that the infrastructure package would not add as much to the deficit as the CBO was expected to report, and other Republican negotiators are expected to follow his lead.

“The new spending under the bill is offset through a combination of new revenue and savings, some of which is reflected in the formal CBO score and some of which is reflected in other savings and additional revenue identified in estimates, as CBO is limited in what it can include in its formal score,” Portman said in a joint statement released with fellow negotiator Sen. Kyrsten Sinema (D-AZ).

Still, budget watchers are bound to be disappointed after calling for any new spending to be paid for in full. “It’s easy to get so wrapped up in it and so wrapped up with the things that you see in the bill that are good … sometimes when you get so wrapped up in that, it’s easy to lose sight of the fact that the pay-fors are fake,” said Sen. Mike Lee (R-UT).

What comes next: A vote on the bill is expected in the next few days. Sen. John Cornyn (R-TX), who said he will oppose the bill, predicted it will advance. “I think the infrastructure bill will pass,” he said, adding, “It’s got enough support.”

Oh, by the way: Democrats’ budget resolution will likely also assume that the reconciliation package will add “somewhere in the ballpark of $500 billion to $1 trillion” more to deficits over the next 10 years, Roll Call reports. Democrats have said that the full $3.5 trillion cost of their plan will be offset, and some in the party have raised concerns about adding to the deficit.

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Senate Careens Toward High-Stakes Game of Chicken on Debt Limit

This right here is exactly what the facepalm emoji was made for: It’s looking ever more likely that Republicans and Democrats are headed for a September showdown over raising the debt ceiling.

A two-year suspension of the borrowing limit expired at the end of July and the Treasury Department has started employing “extraordinary measures” to enable the government to keep paying its bills and avoid breaching the ceiling. Those extraordinary measures may be exhausted shortly after Congress returns from recess in September, Treasury Secretary Janet Yellen has warned. Other estimates suggest lawmakers could have several weeks longer.

Republicans have insisted that they won’t vote to raise the borrowing limit if Democrats push ahead on a partisan basis with their $3.5 trillion reconciliation package. They’ve also demanded that a debt limit hike be accompanied by structural budgeting reforms along the lines of the spending caps imposed after a similar showdown in 2011. Some Republicans have also called for a bipartisan commission on entitlement reform.

“You can’t keep increasing the debt limit over and over again without some kind of reform that starts to address the fundamental issue, and that is deficit spending that goes out as far as we can see,” Sen. Steve Daines (R-MT) told Punchbowl News. “So the most responsible thing that can be done is to attach some kind of [budget] reform that we can get agreement as a condition of raising the debt ceiling.”

Senate Majority Leader Mitch McConnell (R-KY) reiterated the GOP position on Thursday. “If our colleagues want to ram through yet another reckless taxing and spending spree without our input, if they want all this spending and debt to be their signature legacy, they should leap at the chance to own every bit of it,” he said. “Let me make something perfectly clear: if they don’t need or want our input, they won’t get our help. They won’t get our help with the debt limit increase that these reckless plans will require.”

McConnell has suggested that Democrats include a provision to raise or suspend the debt limit in their budget package, which could pass with only Democratic votes. But some moderate Democrats are concerned about the political optics of going that route, preferring to raise the debt ceiling as part of bipartisan legislation to fund the government. Democrats also point out that they didn’t play debt ceiling politics when Donald Trump was president and Republicans added nearly $2 trillion to the debt with their 2017 tax cuts, so they don’t want to reward GOP brinksmanship now.

“The rules that existed under Donald Trump, that we weren’t going to mess with the full faith and credit of the United States of America, was the appropriate and prudent thing,” Sen. Mark Warner (D-VA) said, according to Punchbowl. “To create a fake crisis at this moment, with this much going on in the world, with this much going on in this country, coming out of Covid and dealing with the variant, would be the epitome of irresponsibility.”

That sets up a high-stakes game of chicken, with most Republicans opposed to extending the debt limit as part of a stop-gap spending bill called a continuing resolution.

The bottom line: Whether we see a debt limit showdown this fall should become clear within days as Democrats decide if they’ll include a provision to address the issue in the budget resolution they expect to take up next week.

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US Health Care System Worst Among Wealthy Nations: Report

The U.S. spends more on health care relative to the size of its economy than any other nation, but its health care system ranks dead last among a group of its peers, according to a new analysis from the Commonwealth Fund.

Researchers compared 11 high-income countries: Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom and the United States. They ranked their health care systems on 71 variables, clustered in five broad thematic areas: access to care, the care process, administrative efficiency, equity and health-care outcomes. In four of the five areas, the U.S. ranked last. In the one exception, the care process, the U.S. ranked second.

The top performing countries overall were Norway, the Netherlands and Australia. But the top 10 nations were clustered together on many measures, leaving the U.S. in a class all its own, as the chart below indicates.

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Where the U.S. falls short: The researchers said the top-performing systems have four characteristics that distinguish them from the U.S.:

1. universal coverage with no cost barriers;
2. excellent primary care that is available equally to all;
3. minimal administrative burdens that distract from care;
4. investment in social services, especially for children and working-age adults.

Cost and equity are particularly glaring problems for the U.S., where the wealthy are usually able to purchase excellent medical services but the non-wealthy face difficulties. “We’ve set up a system where we spend quite a bit of money on health care but we have significant financial barriers, which tend to dissuade people from getting care,” the study’s lead author, Eric Schneider, told The Washington Post.

The result is the least affordable health care system in the advanced world, which fails large portions of the population. “We have almost two health-care systems in America: one for people with means and insurance, and another one that falls short for people who are uninsured or don’t have adequate insurance coverage,” Schneider said.

Read the Commonwealth Fund report here.

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Income Inequality Increased Over Past 40 Years: CBO

Household incomes in the U.S. became less equal between 1979 and 2018, both before and after interventions by the government, the Congressional Budget Office said in a new analysis released Wednesday.

The top 20% of households saw their pre-tax and pre-transfer incomes grow by 111% over that time, with an average income of $321,700 in 2018. By comparison, households in the bottom 20% saw their pre-tax and pre-transfer incomes grow by 40%, to $22,500, while the middle quintiles saw growth of 37%. (Transfers refer to means-tested aid programs, including Medicaid, food assistance, rental subsidies, and aid to needy families.)

The tax and transfer systems reduced the overall level of inequality, boosting incomes at the bottom while reducing those at the top. After taxes and transfers, the poorest 20% of households saw incomes increase by $15,200 on average, or 68%, to $37,700. At the other end of the spectrum, the top 20% of households saw incomes decrease by $77,800 on average, or 24%, to $243,900.

The CBO noted, however, that the averages conceal considerable variation, especially at the very top, where the 1% saw much greater income growth. “In 2018, real income after transfers and taxes for that income group was 268 percent greater than it was in 1979,” the report says.

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Quote of the Day

“The record amount of stimulus in the economy has led to the most inflation momentum in 30 years, and our economy has not even fully reopened yet. I am deeply concerned that the continuing stimulus put forth by the Fed, and proposal for additional fiscal stimulus, will lead to our economy overheating and to unavoidable inflation taxes that hard working Americans cannot afford.”

– Sen. Joe Manchin (D-WV) in a letter urging Federal Reserve Chair Jerome Powell and the Federal Open Market Committee to immediately reassess their monetary policy and start “tapering” stimulus measures including the bank’s purchases of Treasuries and mortgage backed securities.

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