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COVID-19 clawbacks, spending caps and a cut – what House Republicans got in return for pushing the US to the brink of default

The White House and House Republicans agreed to a deal just days before the US is expected to default.

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House Speaker Kevin McCarthy has billed the deal as a victory for his party. AP Photo/J. Scott Applewhite

House Republicans pushed the U.S. to the edge of a fiscal crisis because they wanted deep cuts in government spending.

So, based on the tentative deal announced on May 27, 2023, how did they do?

In broad strokes, the deal would suspend the debt limit until January 2025, freeze nondefense discretionary funding at current levels and make a few additional cuts and policy changes designed to appeal to enough Republicans and Democrats to get it through Congress. The deal also included incentives to motivate lawmakers to pass a budget on time in four months.

That provision and the 2025 expiration date should mean the U.S. should avoid a self-inflicted fiscal crisis – including an unprecedented default – until at least after the next presidential election.

No one got everything they wanted. President Joe Biden didn’t get the clean debt ceiling increase he had insisted on for months. Republicans didn’t get most of what they sought in a bill they passed in April – though they did get some of it.

As a professor of public policy and former deputy director at the Congressional Budget Office, I believe the deal, which still needs to pass both houses of Congress by June 5 to avoid a default, does hardly anything to address America’s long-term debt problem, which to me shows why a debt ceiling standoff is not the right way to solve it.

Let’s take a closer look at what I would consider the five main components of the deal to see what they’ll accomplish.

1. Expanded work requirements for SNAP

The Supplemental Nutrition Assistance Program has been a Republican target for a while.

Under current law, an individual must work or be in training for 80 hours per month if they receive SNAP food benefits in three or more out of 36 months, is able-bodied, does not live with dependent children and is under 50 years old. This entitlement program is 100% funded by the federal government but is administered by states, which have the ability to waive the requirements in some low unemployment areas.

The new deal would expand the definition to people up to age 54 and limit some of the state waiver authority. It would exclude veterans and homeless people from the tougher work requirements and expire in 2030.

The Congressional Budget Office had estimated that a similar provision in the House bill – based on extending the age requirement to 55 – would kick 275,000 people off the SNAP roles and save US$11 billion over a decade.

Since states would have to expand their work reporting systems, their increased costs would offset some of the federal savings.

The bill also contains some additional work requirements for welfare recipients for the temporary assistance for needy families program, but the changes are relatively minor.

2. Cap on nondefense discretionary spending

The main way the agreement would restrict federal spending is through the temporary cap on nondefense discretionary spending.

Spending on everything other than defense, entitlements like Social Security and veterans benefits, would stay flat in next year’s budget relative to the 2023 amount and increase 1% the following year, with no limits after that.

But, ultimately, the caps apply to just a small share of total government spending – less than 13%. So not only is it a very minor reduction in spending, it involves a small fraction of the federal budget.

In their House bill, Republicans had sought a larger cut in discretionary spending.

Entitlement programs would be unaffected by the deal, while defense spending would grow by 3.3% next year, as Biden requested in his budget.

One item that would see actual cuts would be the $80 billion that had previously been allocated to beef up IRS enforcement of tax cheats. The deal would trim that by about $20 billion, and the savings would be used to offset cuts to other areas of discretionary spending.

Republicans had wanted to slash this by $71 billion – which, ironically, would have actually resulted in a larger budget deficit because much of that money was going to be used to beef up enforcement to collect more revenue from people who didn’t pay all the taxes they owed.

A black man in a suit speaks at a podium in front of several other people
The deal’s passage will likely depend on whether House Minority Leader Hakeem Jeffries can round up enough Democrats to support it. AP Photo/J. Scott Applewhite

3. Streamlining energy leasing and permitting

Both Republicans and Democrats have interest in expediting the environmental review process for new energy leases, but they have very different priorities.

Republicans are more interested in gas pipelines and fossil fuel projects, while Democrats are more interested in wind, solar and other alternative energy installations. The problem for both is that the approval of environmental and technical plans is very slow and often involves all three levels of government. Also, at the federal level decisions often involve federal agencies with overlapping jurisdictions.

The new deal would make some minor changes to the environmental review process to make it go faster – though it’s less than what Republicans initially wanted.

4. COVID-19 funding clawback

White House and House Republican negotiators agreed to claw back as much as $30 billion in unspent funds from six COVID-19 programs passed by Congress. The estimate is based on the broadly similar House bill.

Some of these funds were allocated to various agencies, while others have already been distributed to states and even to local governments. The actual amount recovered will likely be less than estimated because funds continue to be spent and will take a while to recover.

5. No government shutdown

Negotiators included a provision that would ensure there isn’t another fiscal crisis when Congress must pass 12 appropriations bills by October to keep the government funded into the next fiscal year. I think this is the most important component of the deal.

It automatically funds everything at 99% of the previous year’s level if Congress fails to pass the bills in time. Besides eliminating the possibility of a shutdown over the budget, as the U.S. has experienced in the past, the 1% decrease in funding provides a strong incentive for Republicans and Democrats to negotiate a compromise that keeps their priorities fully funded.

The bottom line

The deal would limit some spending in the short run but does very little to tackle America’s long-term debt problem, which I believe urgently needs to be addressed.

The U.S. national debt has exploded, most recently as a result of trillions of dollars in spending related to the COVID-19 pandemic. At a little under $32 trillion, it’s over 120% of gross domestic product, which is considered unsustainably high and is costing well over half a trillion dollars in annual interest payments. At some point, investors may begin to see U.S. government bonds as a risky investment and stop buying, which would lead to higher borrowing costs and could bring down the entire U.S. financial system.

But using the debt ceiling as a negotiating tactic is unlikely to achieve the kinds of tough choices needed to meaningfully slow the growing mountain of U.S. debt.

About 60% of total government spending goes to fund just a few items, such as Social Security, Medicare and national defense, that are very hard, politically, to cut. And political realities make it nearly impossible to increase taxes.

But a budgeting process known as reconciliation was created specifically for this purpose because it allows Congress to cut any mandatory spending and entitlement program and increase taxes in one bill. It also can’t be filibustered in the Senate – it just needs a majority.

To truly address the debt problem, what is needed, in my view, is a balanced bipartisan proposal that includes cuts to all programs, as well as some significant tax increases. Political brinkmanship won’t get America there.

For all the debt ceiling drama and the risks of profound economic damage and global tensions that resulted from it, Republicans achieved only a two-year cap on a small fraction of the total budget. Reconciliation – and lawmakers willing to govern and compromise – is a far superior way to attain a comprehensive deficit-reduction plan.

Raymond Scheppach does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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International

Von Der Leyen Speech Suggests Russia Dropped Nuke On Hiroshima 

Von Der Leyen Speech Suggests Russia Dropped Nuke On Hiroshima 

Von der Leyen just said what?…

This past Wednesday, President of the European…

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54 mins ago

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September 24, 2023

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Von Der Leyen Speech Suggests Russia Dropped Nuke On Hiroshima 

Von der Leyen just said what?...

This past Wednesday, President of the European Commission Ursula von der Leyen delivered a speech before the 2023 Atlantic Council Awards in New York, where she sounded the alarm over the specter of nuclear war centered on the Russia-Ukraine conflict. But while invoking remembrance of the some 78,000 civilians killed instantly by the atomic bomb dropped on Hiroshima at the end of WWII, she said her warning comes "especially at a time when Russia threatens to use nuclear weapons once again". She  actually framed the atomic atrocity in a way that made it sound like the Russians did it. Watch:

There was not one single acknowledgement in Von der Leyen's speech that it was in fact the United States which incinerated and maimed hundreds of thousands when it dropped no less that two atomic bombs on Japanese cities.

Here were her precise words, according to an Atlantic Council transcript...

You, dear Prime Minister, showed me the meaning of this proverb during the G7 summit in Japan last year. You brought us to your hometown of Hiroshima, the place where you have your roots and which has deeply shaped your life and leadership. Many of your relatives lost their life when the atomic bomb razed Hiroshima to the ground. You have grown up with the stories of the survivors. And you wanted us to listen to the same stories, to face the past, and learn something about the future.

It was a sobering start to the G7, and one that I will not forget, especially at a time when Russia threatens to use nuclear weapons once again. It is heinous. It is dangerous. And in the shadow of Hiroshima, it is unforgivable. 

The above video of that segment of the speech gives a better idea of the subtle way she closely associated in her rhetoric the words "once again" with the phrase "shadow of Hiroshima" while focusing on what Russia is doing, to make it sound like it was Moscow behind the past atrocities.

Via dpa

Russian media not only picked up on the woefully misleading comments, but the Kremlin issued a formal rebuke of Von der Leyen's speech as well:

In response to von der Leynen's remarks, Russian Foreign Ministry spokeswoman Maria Zakharova accused the European Commission president of making "no mention whatsoever of the US and its executioners who dropped the bombs on populated Japanese cities."

Zakharova responded on social media, arguing that von der Leyen's assertions on Moscow's supposed intentions to employ nuclear weapons "is despicable and dangerous" and "lies."

Some Russian embassies in various parts of the globe also highlighted the speech on social media, denouncing the "empire of lies" and those Western leaders issuing 'shameful' propaganda and historical revisionism.

Tyler Durden Sun, 09/24/2023 - 13:15

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International

Saudi Arabia Sentences Schoolgirl To 18 Years In Prison Over Tweets

Saudi Arabia Sentences Schoolgirl To 18 Years In Prison Over Tweets

Via Middle East Eye,

Saudi Arabia has sentenced a secondary schoolgirl…

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2 hours ago

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September 24, 2023

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Saudi Arabia Sentences Schoolgirl To 18 Years In Prison Over Tweets

Via Middle East Eye,

Saudi Arabia has sentenced a secondary schoolgirl to 18 years in jail and a travel ban for posting tweets in support of political prisoners, according to a rights group.

On Friday, ALQST rights group, which documents human rights abuses in Saudi Arabia, revealed that the Saudi Specialised Criminal Court handed out the sentence in August to 18-year-old Manal al-Gafiri, who was only 17 at the time of her arrest.

Via Reuters

The Saudi judiciary, under the de facto rule of Crown Prince Mohammed bin Salman, has issued several extreme prison sentences over cyber activism and the use of social media for criticising the government.

They include the recent death penalty against Mohammed al-Ghamdi, a retired teacher, for comments made on Twitter and YouTube, and the 34-year sentence of Leeds University doctoral candidate Salma al-Shehab over tweets last year.

The crown prince confirmed Ghamdi's sentence during a wide-ranging interview with Fox News on Wednesday. He blamed it on "bad laws" that he cannot change. 

"We are not happy with that. We are ashamed of that. But [under] the jury system, you have to follow the laws, and I cannot tell a judge [to] do that and ignore the law, because... that's against the rule of law," he said.

Saudi human rights defenders and lawyers, however, disputed Mohammed bin Salman's allegations and said the crackdown on social media users is correlated with his ascent to power and the introduction of new judicial bodies that have since overseen a crackdown on his critics. 

"He is able, with one word or the stroke of a pen, in seconds, to change the laws if he wants," Taha al-Hajji, a Saudi lawyer and legal consultant with the European Saudi Organisation for Human Rights, told Middle East Eye this week.

According to Joey Shea, Saudi Arabia researcher at Human Rights Watch, Ghamdi was sentenced under a counterterrorism law passed in 2017, shortly after Mohammed bin Salman became crown prince. The law has been criticised for its broad definition of terrorism.

Similarly, two new bodies - the Presidency of State Security and the Public Prosecution Office - were established by royal decrees in the same year.

Rights groups have said that the 2017 overhaul of the kingdom's security apparatus has significantly enabled the repression of Saudi opposition voices, including those of women rights defenders and opposition activists. 

"These violations are new under MBS, and it's ridiculous that he is blaming this on the prosecution when he and senior Saudi authorities wield so much power over the prosecution services and the political apparatus more broadly," Shea said, using a common term for the prince.

Tyler Durden Sun, 09/24/2023 - 11:30

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International

Biden To Join UAW Picket Line As Strike Expands, Good Luck Getting Repairs

Biden To Join UAW Picket Line As Strike Expands, Good Luck Getting Repairs

Authored by Mike Shedlock via MishTalk.com,

In a symbolic, photo-op…

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2 hours ago

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September 24, 2023

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Biden To Join UAW Picket Line As Strike Expands, Good Luck Getting Repairs

Authored by Mike Shedlock via MishTalk.com,

In a symbolic, photo-op gesture to win union votes, Biden will head to Michigan for a token visit.

Biden to Walk the Picket Line

Taking Sides

CNN had some Interesting comments on Biden Talking Sides.

Jeremi Suri, a presidential historian and professor at University of Texas at Austin, said he doesn’t believe any president has ever visited a picket line during a strike.

Presidents, including Biden, have previously declined to wade into union disputes to avoid the perception of taking sides on issues where the negotiating parties are often engaged in litigation.

On September 15, the day the strike started, Biden said that the automakers “should go further to ensure record corporate profits mean record contracts for the UAW.”

Some Democratic politicians have been urging Biden to do more. California Rep. Ro Khanna on Monday told CNN’s Vanessa Yurkevich that Biden and other Democrats should join him on the picket line.

“I’d love to see the president out here,” he said, arguing the Democratic Party needs to demonstrate it’s “the party of the working class.”

UAW Announces New Strike Locations

As the strike enters a second week, UAW Announces New Strike Locations

UAW President Shawn Fain called for union members to strike at noon ET Friday at 38 General Motors and Stellantis facilities across 20 states. He said the strike call covers all of GM and Stellantis’ parts distribution facilities.

The strike call notably excludes Ford, the third member of Detroit’s Big Three, suggesting the UAW is more satisfied with the progress it has made on a new contract with that company.

General Motors plants being told to strike are in Pontiac, Belleville, Ypsilanti, Burton, Swartz Creek and Lansing, Michigan; West Chester, Ohio; Aurora, Colorado; Hudson, Wisconsin; Bolingbrook, Illinois; Reno, Nevada; Rancho Cucamonga, California; Roanoke, Texas; Martinsburg, West Virginia; Brandon, Mississippi; Charlotte, North Carolina; Memphis, Tennessee; and Lang Horne, Pennsylvania.

The Stellantis facilities going on strike are in Marysville, Center Line, Warren, Auburn Hills, Romulus and Streetsboro, Michigan; Milwaukee, Wisconsin; Plymouth, Minnesota; Commerce City, Colorado; Naperville, Illinois; Ontario, California; Beaverton, Oregon; Morrow, Georgia; Winchester, Virginia; Carrollton, Texas; Tappan, New York; and Mansfield, Massachusetts.

Contract Negotiations Are Not Close

Good Luck Getting Repairs

Party of the Working Cass, Really?

Let’s discuss the nonsensical notion that Democrats are the party of the “working class”.

Unnecessary stimulus, reckless expansion of social services, student debt cancellation, eviction moratoriums, earned income credits, immigration policy, and forcing higher prices for all, to benefit the few, are geared towards the “unworking class”.

On top of it, Biden wants to take away your gas stove, end charter schools to protect incompetent union teachers, and force you into an EV that you do not want and for which infrastructure is not in place.

All of this increases inflation across the board as do sanctions and clean energy madness.

Exploring the Working Class Idea

If you don’t work and have no income, Biden may make your healthcare cheaper. If you do work, he seeks to take your healthcare options away.

If you want to pay higher prices for cars, give up your gas stove, be forced into an EV, subsidize wind energy then pay more for electricity on top of it, you have a clear choice. If you support those efforts, by all means, please join him on the picket line for a token photo-op (not that you will be able to get within miles for the staged charade).

But if you can think at all, you understand Biden does not support the working class, he supports the unworking class.

Tyler Durden Sun, 09/24/2023 - 10:30

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