Nearing the End of the Debt Limit Saga

Plus: Erdoğan wins reelection in Turkey.

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Happy Tuesday! For readers suffering from Succession withdrawals, this story about Japanese Prime Minister Fumio Kishida firing his own son after an ethics scandal is giving us real Logan-Kendall vibes.

Quick Hits: Today’s Top Stories

  • The Ukrainian military shot down at least a dozen cruise and ballistic missiles over Kyiv on Monday, the country’s top military official said—the 16th such attack on the capital city this month as Russian forces attempt to exhaust Ukraine’s air defenses ahead of the now-imminent Ukrainian counter-offensive. Russia reportedly launched 75 drones and missiles at Ukrainian military facilities and other targets across the country, with Ukrainian forces downing 67.
  • More than 30 NATO peacekeepers were injured in clashes with protestors in northern Kosovo on Monday. The NATO forces—made up of servicemembers of several nationalities—were deployed to four Kosovo municipalities after protesters attempted to prevent ethnic Albanian mayors from taking office in Serb-majority areas of the country following recent elections, which were widely boycotted by ethnic Serbs. 
  • Ugandan President Yoweri Museveni signed sweeping anti-LGBT legislation into law on Monday, prompting backlash from President Joe Biden, the European Union, and the United Nations Human Rights Office. Same-sex relationships were already illegal in the East African nation, but the new bill introduces the death penalty for so-called “aggravated homosexuality,” which includes same-sex relations with children or disabled people, or while one party is unconscious, and repeated intercourse between two people of the same sex when one of the parties is HIV-positive. The bill also mandates up to 20 years in prison for anyone “promoting homosexuality,” a vague term which activists fear could be used to target sexual health workers and AIDS healthcare providers.
  • Spanish Prime Minister Pedro Sánchez called a snap election for July 23—roughly six months ahead of the predicted end of his government’s term—after conservatives routed his Socialist Workers’ Party in regional and local elections over the weekend. Sanchez is likely aiming to catch his Popular Party opponents off guard, banking on centrists’ distaste for the possibility of a right-wing coalition in national government that includes the far-right Vox Party. The campaign will coincide with the beginning of Spain’s six-month term as president of the European Union, which starts in July.

Debt Deal Reached 

The U.S. Capitol Building.
The U.S. Capitol Building.

In a May 1993 comic strip, Calvin and Hobbes—his stuffed tiger—are negotiating how to divide up the winnings of an art competition they entered together. Both characters think they deserve the larger share, but eventually settle on a 50-50 split. “A good compromise leaves everybody mad,” Calvin huffs as he storms off.

So it is with the long-awaited debt limit agreement struck between President Biden and House Speaker Kevin McCarthy over the weekend. Hard-right lawmakers have labeled the deal “devastating” and an “insult to the American people,” arguing it puts the United States’ “financial future at risk.” Far-left progressives have claimed the agreement is full of “bad policy” that will “push poor [people] deeper into poverty” and “cripple Biden’s presidency.” The majority of lawmakers between those two poles have some mild frustrations with the legislation, but think it’s generally fine and will—in all likelihood—vote to advance it later this week.

After weeks of talks and a lengthy negotiating session on Saturday, Biden and McCarthy finally came to a tentative “agreement in principle” on legislation suspending the debt limit until January 2025—after the next presidential election—in exchange for a number of modest, but symbolic, cuts to Democratic priorities. By Sunday evening, that “agreement in principle” had been translated into legislative text: the Fiscal Responsibility Act.

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  1. Trichwages

    LUK: I do. Don’t love it, don’t hate it. Biggest dislike is the cut to the IRS but I can live with it. What can be done? Get rid of the debt ceiling and stick to the budget and appropriations.

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  2. Phillyex1

    Without tackling entitlements, this is all just so much BS. If you approved the expenditures, then you already approved the borrowing it takes to pay the bills.

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  3. MikeS

    The debt ceiling deal is fine, the result of sensible compromise. The debt ceiling itself, on the other hand, is simple insanity. Putting the full faith and credit of the United States of America at risk for a couple of political talking points is simply BS.

    So what can be done to change the perverse incentives? Simple...a unified government that repeals the thing forever. I somewhat doubt that a unified GOP government would do that, so I'm hoping the Democrats prevail in 2024 and put an end to this.

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      Ed

      I do not particularly like the Debt Ceiling, as it seems foolish to allow the government to authorize spending levels that will exceed an existing cap. If we are going to spend ourselves into oblivion, I think that the Debt Ceiling should be repealed.

      OTOH, it does provide a venue to allow for negotiations on spending. Unfortunately, that limited ability is pretty much irrelevant, since our esteemed elected representatives run from any discussions about entitlement reform like an arachnophobe from a tarantula migration....

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    Ben Connelly

    Calvin and Hobbes! The source of all wisdom.

    Yes I favor the debt deal. I suppose one way to incentivize Congress to do its job would be to have their salary tied to passing a budget on time.

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  5. Jayjr2

    I will match that with a Cori Bush and a Josh Hawley.

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    Edwinpace

    I would rephrase Calvin &Hobbes observation to: "a good compromise leaves everyone EQUALLY unhappy."

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  7. Harlon Martin

    Based on CBO's February *Baseline Budget* we are headed to FY 2033 Gross Debt of $52T or $46.4T of Debt Held by the Public (the gross debt, less treasuries held by government trust funds like SSA). The debt held by the public grows from actual FY 2022 of $24.2T or 97% of GDP to $46.4T in FY 2033 or 118.2 % of GDP.

    The actual deficit of FY 2022 was $1.3T or equivalent to 79% of total discretionary spending of ~$1.7T (for Defense $746B and non-Defense $910B). CBO projects annual deficit growth to FY 2033 deficit of $2.7T or equivalent to 114% of total discretionary spending of $2.4T (for Defense $1.1T and non-Defense $1.3T).

    https://www.cbo.gov/system/files/2023-02/58848-Outlook.pdf

    CBO states clearly and warns: "Debt held by the public is projected to rise in relation to the size of the economy each year, reaching 118 percent of GDP by 2033—which would be the highest level ever recorded. Debt would continue to grow beyond 2033 if current laws generally remained unchanged."

    RE: "...... if current laws generally remained unchanged."

    For actual FY 2022 total discretionary spending was 26.7% of the total budget spending of $6.2T. So, unless we eliminate or significantly reduce discretionary spending (that would include critical Defense spending), everything needs to be on the table, including Mandatory spending that is primarily Entitlements (aka -- the promises made in the past, that will be difficult and/or impossible to sustain in the future).

    Unless or until both parties together tell the truth to the American public; the political class are all either in denial or just deflecting (lying) and are thereby complicit in delaying the critical decisions to be addressed and just passing it on to subsequent political leadership. It is easier to create / increase entitlements (please your political base) and just kick the deficit / debt level can down the road and leave it to the next generation to make the required tough decisions.

    The debt increase deal is politically performative by the Rs and Biden to appear they have done something; but there will be a repeat increase of the debt limit crisis hereafter without the real issues of the budget, deficit, and debt being addressed -- count me cynical! TMD rightly concludes: "If passed, the agreement will avoid a default—which could happen as soon as Monday–but as it avoids serious reforms to entitlement programs, will do little to reduce the national debt."[and] ....... Riedl says. “The final outcome is really a drop in the bucket.”

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      Ed

      Well said!

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    This comment has been deleted

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    Kevin Johnson

    Kevin’s piece from Kiev is the best reported analytic piece I remember ever reading. Unbelievably good, except I expect brilliance from him. Kudos to Kev and the founders!

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  10. Brook

    Mr. Jeffrey says that, without Turkey, it will be hard to accomplish “existential things in Eurasia.” Is that the consensus view of principled experts? I am asking, not arguing. I have no idea.

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