Public Investment Is At A Crossroads As Republicans in Congress Hold The Debt Ceiling Hostage

Feb 27

What happens when the most powerful institution in the world does not fund the investments it has made in its people and communities? Thanks to House Republicans threatening to hold the federal debt ceiling hostage, we may be careening towards an answer to that question. Default could do irreparable damage to American governance, sow chaos in the global economy, and undermine progressive advancements for decades.

While that may sound melodramatic, it is not an exaggeration. If Congressional Republicans do not waver in their demands for spending cuts and the federal government runs out of money to pay our bills, then every gear of governance could grind to a halt. That means federal regulators can’t be paid, many social welfare programs that support working families stop operating (at least temporarily), and progress towards long-term goals like greening the economy will come to a standstill. Even programs like Social Security or Medicare could be impacted by a government-wide shutdown. And when the government is forced to pause operations, our economy will take a huge hit as well.

The stakes are very high, which is exactly what the House Republican strategy relies on. To be clear, this is not typical “political gridlock” or “politics as usual.” The deal being offered — that Democrats agree to massive spending cuts in exchange for Republicans avoiding default — is unacceptable. It represents Republican leadership’s latest attempt to weaponize budget processes and slash investment in vital agencies, jobs, services, and benefits.

This isn’t the first time the debt ceiling has been used to force Democrats to the negotiating table. Back in 2011, House Republicans threatened default if President Obama refused to implement significant spending cuts. The Obama administration acquiesced to Republican demands and agreed to a scheme that capped discretionary programs and built-in automatic cuts, called sequestration. The resulting cuts prolonged the recovery from the Great Recession and undermined our economic strength and stability. Using the debt ceiling as a bargaining chip remains as sinister today as it was in 2011. In essence, House Republicans are giving Democrats two options: either give in to harmful spending cuts or they will run the economy into the ground.

Even with cuts to Social Security and Medicare reportedly off the table, many essential programs that support families and workers will be in jeopardy. For decades, conservatives have been looking to gut vital agencies like the Consumer Financial Protection Bureau, the Environmental Protection Agency, and the Department of Commerce. Cutting non-defense spending and weakening the public sector limit our ability to recover from economic crises, protect communities, and prepare for future crises. And frankly, one legacy of that 2011 debt limit showdown is a government already stretched thin. As we at the Revolving Door Project have covered, government capacity has languished in recent decades and remains far below what is needed for agencies and departments to adequately serve families and communities.

We’ve also covered how the media has skewed the conversation by warning not of a default but of a political fight. This framing makes it seem like Congressional Democrats rolling over would solve the issue. It wouldn’t. In order to make real progress in this moment of overlapping crises, and to build on the success we’ve had in recent years, we need more government investment to fight corporate concentration, protect workers, combat climate change, and preserve democracy. Rolling over and making deep spending cuts will not accomplish any of that.

President Biden needs to remember what happened more than a decade ago and hold firm in the face of Republican brinkmanship. After decades of disinvestment, Democrats under Biden’s leadership have finally started to correct course with new, desperately needed investments in government capacity. But the past two years have not undone the damage of decades of deregulation, and more reinvestment is sorely needed. Plus, there is reason to believe that the debt ceiling is unconstitutional anyway. Refusing to negotiate, especially with people who won’t even make their demands clear, is the only way to get a workable solution and push for the investments that foster a prosperous economy that works for all of us.