Notes from the Swamp

This could be the year in which political reality finally affects our economy

Let’s start with one thing we don’t have to think about anymore: who is going to be the speaker in the House? Kevin McCarthy finally won office after 15 votes, but some of the compromises he’s made to get there are going to make it even more difficult for Republicans, let alone government as a whole, to get much done.

That’s very bad news, given that one of the first things Congress has to do this January is raise the debt ceiling. Failure to do so would result in the first public debt moratorium in history (Peter, I’m curious: what do you think the market would react to such a situation?). But as staunch opponents of Kevin McCarthy, known as never kevin, from the Republican party got a promise to cut spending to offset any increase in the debt ceiling, that means targeting things like Biden’s tax plan (which Democrats hope will actually reflect on the economic experience of voters this year), or entitlements such as Social Security or Medicaid. They are off-limits to Democrats, which means a big fight is coming up.

The Never Kevin’s (I hate them, but the phrase itself makes me laugh every time I say it) They also got McCarthy to agree to allow them to add an unlimited number of amendments to bills. Think about it. He thinks of the kind of crazy things radicals will try to add to anything useful in order to obstruct the laws, and he thinks of all the filibusters there will be. Moderates should get paid overtime just for being in Congress for this.

Peter, you argued in last week’s Notes from the Swamp that Republican bad behavior can be traced back to the Tea Party. But I would say that what we are seeing now is the natural end point of Reaganism. If you tell people that the government is the problem, in the end it becomes that. For decades, the Republicans have been in the filibuster business, doing everything they can to challenge the Democrats and prevent even the moderate Republican establishment from achieving any legislative success on anything. They were the party of NO!!! They were good at it, or pretty good at it, and it was a very, very fun game for them because nothing bad ever came of it, at least in their minds. While the Democrats lost, they won.

Well, now they have to stop presenting baseless ideas and do something that is much more difficult, which is called governing, and they just don’t get used to the idea. Comedian Stephen Colbert did a wonderful parody of this: the movie Knives Out in which EVERYONE did it, and the head investigator is a goofball who is in on it too.

Although McCarthy eventually got the job, and should be the face of his party, I would argue that the Republicans are now best defined not even by Trump, but by Rep. George Santos, the complete fraud through and through. In addition to lying about his education, his employment history, his religion, and even his own mother’s cause of death, he also lied throughout the House scandal about being sworn in, when NO ONE was sworn in. because of all the uproar in the room. He spent most of that time running through the halls of Congress, chased by journalists, unable to find his office.

In this regard, Peter, I’ll come back to the issue of the US economy and how this level of political dysfunction could affect it. It’s been a bit unbelievable that the markets haven’t reacted more to the Congressional clown car in recent years. Have we reached a tipping point? Will 2023 be the year that political reality influences our economy?

Peter Spiegel responds

Frog, since the new year is only a week old, I’m going to try to remain optimistic. You’re right that the first big test for newly appointed House speaker Kevin McCarthy will be when the debt ceiling needs to be raised (most who follow federal government outflows and tax revenues predict that this will occur sometime in the early second half of the year). But while McCarthy’s slim majority has given a small group of bomb-throwing Republicans the power to extract unprecedented concessions to unlock his path to the House presidency, the reverse is also true: it would only take a small group of Republicans from the “regular team” join the 212 House Democrats in raising the debt ceiling.

This is essentially what happened the last three times that Republican fundamentalists tried to take the full faith and credit of the US government hostage with unreasonable demands. A year ago, Senate Republicans turned a blind eye when Democrats used a parliamentary trick to raise the debt ceiling by a simple majority, rather than the filibuster-proof supermajority normally needed to pass a bill in the House. high. Two more damaging shutdowns occurred under President Barack Obama in 2011 and 2013, after Republicans recaptured the House of Representatives in the 2010 midterm elections. But in both cases, moderate Republicans were ultimately forced to compromise. agreement with the White House. In 2011, they were motivated by the turmoil in the financial markets; in 2013 his poll numbers began to plummet.

There are 18 House Republicans representing districts that Biden carried in 2020, and several of them — especially in the suburbs of cities like New York, Philadelphia and Los Angeles — are districts that Biden carried by a landslide. The suburbs are where Republican bombers have done the most electoral damage to the party: just ask Brian Fitzpatrick, a Republican from a Democratic-leaning district outside Philadelphia who is co-chairman of the call Problem Solvers Caucus, a bipartisan group of moderates that has worked to push important bills through the House of Representatives. That’s exactly the kind of groupings that could settle another debt-ceiling fight.

Financial markets seem to realize this: after the shocks of 2011, markets barely noticed the debt-ceiling fights of 2013 and 2021. In the end, a bipartisan group of moderates usually prevails. The commitments McCarthy made to become a House speaker will no doubt make a debt-ceiling deal even more difficult; after all, the speaker has a lot of power to set the agenda in the House. But what last week’s fight made clear is that McCarthy will be a very weak House speaker, and there are various parliamentary tricks (“discharge petition” anyone know?) that can bypass McCarthy in an emergency. .

Foroohar Frog, peter spiegel

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Notes from the Swamp – Political Paralysis in 2023