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Federal Tax

Republican House Conservatives Threaten Debt Limit Default to Cut Social Programs

Jeff Carlson  

Jeff Carlson  

At some point in 2023 Congress will need to address the debt limit and several leading GOP House members are threatening to block an increase to force cuts to Medicare and Social Security spending. “It’s very troubling,” said Representative Lloyd Doggett, Democrat of Texas, of the chances of a debt limit crisis later this year. “We put at risk the economic future not only of our country but the world,” he said.

Representative Jodey Arrington, a Texas Republican, has indicated that raising the retirement age for Social Security and the eligibility age for Medicare would be commonsense changes. Representative Buddy Carter, Republican of Georgia, has expressed his intent to cut spending in conjunction with raising the debt ceiling. Representative Lloyd Smucker, a Pennsylvania Republican has stated his wish to establish means testing—setting income eligibility levels—for Social Security and Medicare.

Means testing refers to the policy of providing no benefits to the people with incomes or assets above a certain level. But workers at all income and asset levels have worked to earn their Social Security and Medicare benefits and rely on them as well.

Representative Jason Smith, Republican of Missouri, currently the ranking Republican member on the House Budget Committee, has indicated that he wants to use debt limit talks to extract concessions from President Biden on entitlements and spending. He has said that Congress must use every tool at its disposal “to right size the federal government” and that “[t]he debt ceiling absolutely is one of those tools.” And presumptive House Speaker and California Republican Kevin McCarthy has gone on record saying he would not “predetermine” anything, leaving the distinct possibility that Social Security and Medicare changes are on the table.

The debt limit places a statutory constraint on the amount of money that Treasury may borrow to fund federal operations. Federal debt is projected to reach the current debt limit, set at $31.385 trillion, sometime in 2023.

Brinkmanship over the debt limit is not unheard of. According to a Congressional Research Service (CRS) report (The Debt Limit Since 2011 (R 43389)), just after July 31, 2021, a debt limit suspension, enacted as part of the August 2019 Bipartisan Budget Act (BBA 2019; PL 116-37; HR 3877), lapsed. The U.S. Treasury then used extraordinary measures, allowing use of some civilian retirement funds and certain other smaller funds to pay federal obligations, according to the CRS. A 2011 debt limit episode was resolved on August 2, 2011, when President Obama signed the Budget Control Act of 2011 (BCA; PL 112-25). The BCA set statutory caps on discretionary budget authority and sequestration of non-exempt mandatory spending.

Possible economic and fiscal consequences of the debt limit are not confined to scenarios where the debt limit is binding, according to the CRS. Protracted deliberation over raising the debt limit may also affect the U.S. financial outlook if it changes household and business behavior. Some research suggests that debate over the debt limit in August 2011 reduced economic expansion in the second half of that year.

When the House Speaker issue is finally resolved, the House Rules Committee will vote on a rules package for the new Congress. The package includes a provision calling for the elimination of the Gephardt Rule, preventing the House from automatically suspending the debt limit upon passage of a budget resolution. In addition, the measure reinstates the CUTGO rule, requiring mandatory spending increases to be offset by a corresponding cut in mandatory spending and it reimposes a three-fifths supermajority in the House to approve any increases in tax rates.

Legislation to increase or suspend the debt ceiling would require both passage by the House of Representatives and Senate and the president’s signature. With a Democratic majority in the Senate and a Democrat for President, chances of House legislation to curb the debt limit through cuts to social service programs is unlikely to make its way into law.

 

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