Negotiating with Hostage-Takers

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The current issue of The Week features a cover story called “Hostage Crisis,” with a picture of House Speaker Kevin McCarthy setting fire to a dollar bill. The subtitle is, “Will McCarthy and the GOP force the U.S. to default on its debt?” This got me thinking about the importance of language in framing issues, both by journalists and the people who follow them. Which is the more accurate description—“hostage crisis” or just “budget negotiation”?

Neutrality and truth

Many journalists have associated truth with political neutrality. Faced with vigorous political debate, they think of their job as reporting the facts without taking sides. When they report on the perennial budget battles between Republicans and Democrats, their underlying assumption is that each side has reasonable arguments. Compromise is good, even to the point of meeting the other side halfway. I am not unsympathetic to that view, since I don’t believe that either of our major political parties has been right all the time.

Nevertheless, a fair observer must be able to notice when either side’s behavior strays too far from democratic norms. Those norms call for dispute resolution by means of reasoned debate, persuasion and compromise. One cannot tell the whole truth without being able to distinguish between voluntary consensus and involuntary coercion.

To take a rather obvious case, can objective observers be neutral about the war in Ukraine? Can they ignore the fact that Russia’s invasion violates international law, and that attacks on civilian targets constitute war crimes? A negotiated settlement might be desirable, but not if it means capitulation to Russian demands, or even meeting them halfway. What should Ukrainians do for peace, give up half their territory? And what should they do when Putin comes for the other half? Donald Trump claims that he could settle the war in a day, but he also refuses to express a preference for which side wins. Is this statesmanship or indifference to democratic values?

The war in Ukraine is a long way from a budget negotiation, but maybe the same principle applies. When one side threatens to force the federal government to default on its obligations if it doesn’t get its way, that is also a violation of democratic norms. It forces the other side to negotiate with a gun to its head, or more specifically with a gun aimed at the heart of the economy. As Josh Bivens and Samantha Sanders put it in their post for the Economic Policy Institute, “Weaponing the debt limit should not be normalized.”

Deficits and debt

The public debt is an integral part of the modern economy, and the “full faith and credit” of the US government is essential to that economy, both domestically and globally. This is the reality, whether you think of the public debt as a good thing or a bad thing.

Economists disagree over the pros and cons of the public debt, but they generally acknowledge that it is very different from household debt. Household debt is usually something you would like to pay down or even get rid of altogether. Public debt is a liability for the taxpayers, but at the same time it is a nice, safe asset for the holders of the government bonds. When the federal government runs a deficit, it puts more money into the economy in spending than it takes out in taxes, but then encourages the public to invest in government by buying treasury bonds. Investing in government and growing the economy are not incompatible goals. Rolling over the public debt from year to year is never a problem, as long as the security of those bonds makes them a very desirable investment.

Historically, the public debt has grown along with the size of government and the size of the economy, and the statutory limit on the public debt has been raised repeatedly. The economy has come to rely on deficit spending, especially but not exclusively during turbulent times. Many forms of federal spending, such as infrastructure improvements and human capital investments, contribute to the strength of the economy. Economists do become concerned when the public debt grows faster than the economy itself, as it has recently. Since 2013, the total debt has exceeded the annual output of goods and services in the US economy, and many economists would like to see that trend reversed. Either a faster rate of economic growth or a slower rate of debt growth would help.

However, even economists who consider the federal deficit too large do not support defaulting on current obligations, or even threatening to do so. The full faith and credit of the United States is one of our country’s most valuable assets. Any failure of the government to pay its current bills would cause enormous immediate hardship, probably start an economic depression, and do lasting damage to the country’s credit rating. That in turn would increase the cost of borrowing and further weaken the government’s fiscal position.

The current deficit is simply a consequence of authorizing more spending than the government is getting in tax revenue. Continuing to finance the difference is far preferable to default, whatever you think of the national debt. The priorities for dealing with a large deficit are first to raise the debt ceiling to finance the difference, and then to negotiate a smaller deficit in future budgets.

The current standoff

If anything is a bipartisan accomplishment, it is the federal deficit. The Trump administration and Congressional Republicans added substantially to the budget deficit and national debt, first by cutting taxes (mainly for corporations and the wealthy), and then increasing expenditures to combat the Covid-related recession. Both political parties agreed to raise the debt ceiling three times to accommodate rising deficits. President Trump explicitly warned Congressional leaders not to use the threat of default to upset his budget plans, and they listened.

Now that we have a Democratic president, Trump and Congressional Republicans have changed their tune. They are happy to use the threat of default to derail President Biden’s plans, although his proposed deficit is smaller than Trump’s. When asked at his recent town meeting why he changed his mind, Trump shamelessly embraced his own hypocrisy by saying, “Because I’m no longer President.”

For a time, House Republicans struggled to agree on any budget proposal at all. They finally passed a bill to raise the debt ceiling, but attached to it a set of budget demands too extreme to have any possibility of becoming law. The difference between the Biden plan and the Republican plan is not that only one plan reduces the deficit; they both do. But they do differ in three important ways:

  • Biden wants to reduce the deficit by rolling back some of the Republican tax cuts, while Republicans want to do it only by reducing spending. This is a longstanding disagreement between the parties.
  • Only the Republicans are threatening to let the government default if they don’t get their way on the budget. President Biden and the great majority of Democrats are willing to raise the debt ceiling to meet current obligations before negotiating future budgets.
  • While President Biden has submitted a complete budget plan, the Republican proposal calls for a general cap on spending without specifying the budget cuts by which the cap would be achieved.

That last point deserves some elaboration. Calling for only a cap on future spending allows Republicans to claim the high ground of fiscal responsibility without having to defend specific cuts to the voters. All they will say is what they will not cut, like Social Security, defense spending, and interest on the existing debt. Trouble is, what they promise not to cut is almost 90% of the budget! That means that the budget axe has to fall heavily on the non-defense discretionary spending that remains. The Congressional Budget Office estimates that everything else the government does would have to be cut 47%. But don’t worry, that “everything else” only includes the Departments of Homeland Security, Agriculture, Interior, Commerce, State, Health and Human Services, Education, Energy, Labor, Justice, Housing and Urban Development, and the Environmental Protection Agency. The list of specific services that would have to be cut is very long—How about cutting half the air traffic control towers, or half the nutrition services for seniors, or half the Head Start programs? No wonder Republicans only want to talk about vague goals and not specific programs most Americans support.

The Republican proposal also calls for rescinding funding that has already been authorized, such as money for clean energy tax credits and money being used by the IRS for better customer service and tax-law enforcement. The CBO says that the IRS cuts would actually increase the deficit by losing tax revenue.

The Republican position consists essentially of a ludicrously extreme set of demands backed by a threat of economic destruction. It deserves to be called extortion, blackmail, hostage-taking—choose your adjective.

The challenge to democracy

I have been arguing recently that Republicans are increasingly willing to violate democratic norms because they are starting to lose policy debates that they are accustomed to winning. In my post, “Whatever happened to Republicans,” I elaborated on Dana Milbank’s observation that the GOP has become “an authoritarian faction fighting democracy” because “democracy is working against Republicans.” Milbank was mostly talking about how demographic change was moving against the party, but I think that the argument applies to economic changes as well. The dominant fiscal policy position for Republicans, which calls for tax cuts for the wealthy and austerity for the rest of us, has become increasingly unpopular. The Trump tax cuts were already unpopular when they were passed. Many forms of spending that Republicans have opposed—Obamacare, Medicaid expansion, new energy initiatives, and infrastructure improvements—are receiving strong support.

The coercive stance of House Republicans on the debt ceiling debate is consistent with other undemocratic behaviors, such as trying to overturn a presidential election. (147 Congressional Republicans voted not to accept certified results from key states.) The continuing effort at the state level to suppress or dilute the vote from Democratic areas is another example.

Republicans accuse President Biden of refusing to negotiate. But how does one negotiate with hostage-takers? Give too little and they may carry out their threat; give too much and you reward coercive behavior. Certainly the victim of a hostage-taking cannot be expected to meet the perpetrator halfway, but should do only what is necessary to save the hostage. If we could get the threat of default off the table, then we might have an open and honest debate over the budget. Both sides should have to present specific proposals and defend them in the public arena. We should also expect that if political leaders can manage such a debate, journalists will cover it seriously, and the American people will listen and learn. Idealistic, yes. But so is democracy.


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