Meeting today in the Oval Office, 80-year-old President Joe Biden and 58-year-old House Speaker Kevin McCarthy (R-Calif.) continue their dangerous game of chicken over an $1.5 trillion increase in the debt ceiling. McCarthy wants Biden to agree to $2.8 trillion in spending cuts, essentially gutting his Inflation Reduction Act, with all its investments in social programs and promoting clean energy. Republicans want Biden to end the red tape on fossil fuel production, something made more difficult since he took office Jan. 20, 2021. Former President Donald Trump touted U.S. energy independence under his watch, something changed by the Green Lobby led by Rep. Alexandria Ocasio-Cortez (D-.N.Y.). Once Biden committed to a Russian oil embargo, he sent oil prices skyrocketing worldwide. Biden begged 37-year-old Saudi Crown Prince Mohammed bin Salman to drill for more oil.
When Bin Salman said OPEC would not increase oil production, Biden created scarcity and skyrocketing prices, prompting the GOP, in the current budget negotiations, to demand more domestic oil production. Biden’s left wing climate advocates want no part of any more fossil fuel drilling, pushing Biden to hold firm in any talks with McCarthy. McCarthy’s Freedom Caucus, led Rep. Ralph Norman (R-S.C.) refuse to increase taxes on millionaires, actually anyone making over $400,000 a year. Biden wants more revenue to offset spending, where Freedom Caucus Republicans want to continue the 2017 Trump tax cuts. Sen. Rick Scott (R-Fl.) thinks Biden is accustomed to Republicans caving in when it comes to taxes. “I think he’s being conditioned,” Scott said, thinking Biden’s left-wing base won’t permit any cuts, especially in entitlements to the poor, like the SNAP food stamp program.
Former President Donald Trump said in May 10 CNN town hall that if Biden doesn’t give Republicans everything they want, McCarthy should let the country default. “Republicans should not make a deal on the debt ceiling unless they get everything they wants [including the kitchen sink],” Trump said on his Truth Social platform. Trump knows that when he was president he and former House Speaker Nancy Pelosi raised the debt ceiling three times but only once with guaranteed spending cuts. Why Trump wants $2.8 trillion in spending cuts now is anyone’s guess, other than making Biden look bad. “Everything I’ve heard from people is that they’re pushing for it,” said Scott, referring to the proposed tax cuts on the rich. “He would never get it done in the House,” said Scott, referring to McCarthy pushing through Biden’s tax hikes on the taxpayers making $400,000 or more.
Freedom Caucus conservatives threatened to impeach McCarthy if he dares to defy their draconic spending cuts. “Republicans have an unreasonable request on the table” said Democrat think tank “Third Way” Executive Vice President Jim Kessler,” questioning whether McCarthy would defy the Freedom Caucus demands for $2.8 trillion in spending cuts. “The drama has always been—can a debt ceiling increase be passed and Kevin McCarthy keeps his job? That’s not Joe Biden’s responsibility, but that one of the chips that Kevin McCarthy is playing on this,” Kessler said. Kessler believes at the end of the day, Biden and McCarthy will cut a deal, with his job still in tact. Like other House Speakers, McCarthy plays more centrist, trying to placate his caucus, while, at the same time, remaining reasonable in pursuing a deal that ultimately works for Democrats and Republicans.
Biden and McCarthy both need a domestic policy win heading into the 2024 elections. Any default of the U.S. government would be looked on unfavorably by voters, blaming both Democrats and Republicans. But with polls showing Democrats having mixed feelings about the way Biden manages domestic and foreign policy, letting the country default would sour voters on giving Biden a second term. Any default, even temporary, on U.S. credit would sour voters on Biden’s leadership. Democrats think voters would blame Republicans but Biden has enough negatives now with only a 40% approval rating. More gridlock, especially if it harms the stock market and drives the country into recession, would be enough for independent voters to go for a fresh face in the name of Florida Gov. Ron DeSantis. Democrats and the press think Trump has a lock on the GOP nomination.
Biden and McCarthy will cut a debt ceiling deal at the 11th hour to avoid a default on U.S. credit obligations. Neither side can afford to damage the U.S. economy, beyond it’s obvious problems under Biden. Treasury Secretary Janet Yellen said today that the drop-dead date of June 1 still stands where the government defaults, at least temporarily. Neither side wants the political fallout so some kind of face-saving deal is in the works, judging by Wall Streets modest losses, despite mixed statements from Biden and McCarthy. Democrats and Republicans don’t want to prolonged the debt-ceiling negotiations beyond June 1, needing closure on the subject. “There is some anxiety,” said Axel Merk, CIO of Merk Investments, saying credit default swaps, or insurance against a drop in underlying assets, have increased. Democrats and Republicans look to cut a deal in the next week.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.
