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Analysis | Manchin’s plan to avert a debt crisis just might work

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As part of a deal to raise the debt ceiling, Joe Manchin wants Congress to appoint a bipartisan entitlement reform committee. I know what you’re thinking: another debt ceiling crisis? Another bipartisan committee? Another congressional session dominated by what Joe Manchin wants?

This time, however, it’s more Republicans than Democrats who should appreciate the wisdom of playing ball with the moderate Democratic senator from West Virginia. House Speaker Kevin McCarthy and his colleagues have cornered themselves on this issue. They have made it clear what they do not want to do – raise the debt ceiling without concessions from the Democrats – but they have no alternative proposal of their own.

Meanwhile, while it’s easy to roll our eyes at the similarity between Manchin’s proposal and the failed Joint Select Committee on Deficit Reduction that met in 2011, the current situation is different in key ways.

During former President Barack Obama’s first term, concerns about the deficit were pure political hysteria. Interest rates were low, inflation was low, unemployment was high, and the Federal Reserve was discussing how far to go with unorthodox monetary measures to stimulate the economy.

The current economic reality has completely changed. Unemployment is at its lowest level in decades. Inflation, while down from last year’s highs, is still well above the Fed’s target of 2%. And interest rates, while not exactly high historically, are higher than they have been in a long time – and are still rising.

Under the circumstances, a call for deficit reduction actually makes sense.

At the same time, the internal politics of the Republican Party have shifted. In 2011, for better or worse, John Boehner and Paul Ryan had a House majority ready and willing to pass radical budget proposals that called for massive cuts in Medicaid and domestic discretionary spending, while also privatizing Medicare. The attempt to force the White House to join such a plan as the price of raising the debt ceiling failed, but they tried.

Fast forward to 2022, when Senator Rick Scott’s agenda for spending cuts was immediately rejected by Minority Leader Mitch McConnell. Florida Governor Ron DeSantis hardly ever talks about fiscal issues publicly, even though he has become a conservative superstar, partly by winking to the donor class that (unlike his rival Donald Trump) he is not opposed to budget cuts. social security and Medicare.

In short, no one in the Republican Party within six feet of a competitive election wants to participate in major budget cuts. That’s why, despite all the drama in the House, Republicans are nowhere near drafting a plan that has anything like 218 votes.

They demand that the Democrats negotiate with them, but they have no position to form the basis for starting negotiations. So the White House and most Democrats on Capitol Hill easily reject the various piecemeal Republican proposals, which they see as an attempt to get Biden and Democratic leadership to negotiate with themselves.

In part, Republicans may be overestimating their own influence because they misremember the Obama-era debt ceiling crisis.

A crucial factor in 2011 was that Obama genuinely wanted a dramatic bipartisan deal to reduce the deficit. For whatever mix of political and substantive reasons, it was one of his priorities, and he was not opposed to using the debt ceiling as a way to get conversation started.

Biden, despite his penchant for bipartisanism and his embrace of deficit reduction as part of the misleadingly named Inflation Reduction Act, seems in no hurry to strike a bipartisan deal on the deficit.

He passed the Inflation Reduction Act to restart talks with Manchin. But it was a partisan bill whose main goal was to advance Biden’s energy and healthcare policies. And he has spoken relentlessly, during his campaign and since becoming president, about unifying the country and signed a series of bipartisan legislation that the White House is very proud of.

But a major deficit reduction deal has never been a government priority. He seems less convinced than Obama was of the merits of entitlement reform, and more willing than Obama was to simply go with the flow rather than try to convince Republicans to raise taxes.

This changed situation is exactly why Republicans should take Manchin seriously.

The supercommittee, the Simpson-Bowles commission and similar efforts failed last time because Republicans believed they could get a better deal by beating Obama and taking a comprehensive approach to reducing the deficit. But they didn’t beat Obama — taxes went up — and by the time there was a GOP government majority in 2017, there was no party consensus for scrapping Medicare and Social Security. Conservatives had overplayed their hand.

Manchin offers the Republicans both a way out of the dead end they’ve found themselves in, and another chance to cut rights. Democratic leaders are no longer enthusiastic about this idea, but if Republicans were united around anything with even a bipartisan patina, Biden and moderate congressional Democrats would have a hard time saying no.

More from Bloomberg’s opinion:

• The nonsense about the debt ceiling has gone on long enough: the editors

• Financial engineering of the debt ceiling: Matt Levine

• Are Democrats taking Joe Manchin for a ride?: Ramesh Ponnuru

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This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.

Matthew Yglesias is a columnist for Bloomberg Opinion. A co-founder of and former columnist for Vox, he writes the Slow Boring blog and newsletter. He is most recently the author of ‘One Billion Americans’.

More stories like this are available at bloomberg.com/opinion

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