Amid the brinksmanship and finger-pointing on both sides of the aisle, a fundamental question, and the source of the conflict, remains. How can an unaccountable U.S. government be prevented from driving the country off a fiscal cliff that leads to souring inflation, a credit crisis, and national insolvency? The question itself assumes it is not too late for us to escape the deficit-debt-inflation doom loop.
Astonishingly, the Biden administration and half of Congress don’t even acknowledge the problem. They are under the soporific spell of so-called modern monetary theory, which perniciously posits that governments, especially the issuer of the global reserve currency, can run unlimited deficits simply by issuing more debt, and then by taxing away the inflation that emerges as a result. It is as if the government could suspend the laws of gravity by simply willing it so.
As the deadline looms, the Biden administration and fiscal conservatives in the House remain deeply divided on whether to permit funding of the U.S. government’s ongoing expenditure through continuing resolutions (CRs), the stopgap temporarily measures that allow the government to fund itself for the coming month. There no longer remain good faith conversations between the absentee White House and divided congressional leadership. California Republican House Speaker Kevin McCarthy is stuck in the middle, trying to navigate between those allied with the House Freedom Caucus—conservatives leaders demanding fiscal accountability—and those in government who believe that the deficit-spending fiesta can and should continue indefinitely, consequences be damned.
Just last month, credit ratings agency Fitch Ratings downgraded the long-term credit rating of the United States. One of the primary reasons Fitch cited for the downgrade was “erosion of governance,” noting that “the repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.” By pointing out that the federal deficit was expected to rise from 3.7 percent of U.S. GDP in 2022 to 6.3 percent in 2023, and worsen from there in 2024 and 2025, Fitch drew attention to the elephant in the room: U.S. government spending is out of control like a runaway train, and no one seems capable of stopping it.
Indeed, just a few weeks later, total U.S. national debt has crossed the $33 trillion threshold for the first time in history. The annualized run-rate of interest payments to service that debt is approaching $2 trillion. Moody’s, the only remaining major credit ratings agency to maintain the U.S. with a ‘AAA’-equivalent rating, is now warning that unresolved negotiations will worsen fiscal pressures on the U.S. credit position. This may eventually result in a downgrade and, more substantially, precipitate a credit crisis for U.S. debt.
The House Freedom Caucus and other conservatives have dug in their heels, and rightly so. Continuing resolutions (CRs) provide a stop-gap solution to allow funding to continue, but kick the fiscal can—and all the related hard decisions—down the road. In recent years, the CR process has provided the government with a hall pass to carry on spending until an omnibus appropriations bill could be brought forward at year-end. This process of voting up or down (yes or no) on everything all at once makes no sense. It provides Congress no time to review or debate individual appropriations. It is a take it-or-leave it approach with a gun at one’s head, and it must end.
This is why at the heart of the debate has been the demand to move to review and approval of single-subject spending bills. In order to seal his election as House Speaker, Mr. McCarthy promised in January to end the process of continuing resolutions and move to single-subject spending bills. Notwithstanding the commitment, the process of CRs has continued throughout 2023. This month, Rep. McCarthy and GOP leadership finally conceded to the pressure of Rep. Matt Gaetz (R-Fla.) and other conservatives. Mr. McCarthy agreed to act on several full year spending bills before returning to address the stopgap funding needed for next week. There are four appropriations bills going before the House this week: Defense, Homeland Security, Agriculture, and the State Department’s Foreign Operations.
These four appropriations are interrelated, and House conservatives want to see them dramatically curtailed. Generally, House conservatives want to end “woke spending” (e.g., using U.S. taxpayer money to fund LGBTQ projects in other countries), increased funding to secure the southern border, restricting further military aid to Ukraine and foreign aid generally, and targeting massive waste and corruption in food stamps and other agricultural programs.
Take the issue of funding to Ukraine. According to the Center for Strategic and International Studies (CSIS), since Russia’s invasion of Ukraine in February 2022, the United States has authorized over $113 billion of spending in support of Ukraine. This is a massive outlay. Of this amount, the majority ($62 billion) has gone to the Department of Defense, while an additional one-third ($36 billion) has gone to the CIA-backed U.S. Agency for International Development (USAID), and $10 billion has gone to the State Department. Americans are rightly asking whether this money isn’t put to better use elsewhere, like securing our southern border, where community destroying fentanyl and millions of military-age men, potentially hostile to the nation, continue to pour in unhindered by the Biden administration.
This is all happening while departments of the U.S. government are weaponized against their political enemies and ordinary Americans, and as evidence mounts that the worst forms of corruption have tainted our highest office.
The confrontation in Congress—and the likely government shutdown—is about much more than appropriations. It is about the future of our nation.
