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House Republicans have, once again, promised not to raise the US debt limit until there are major spending cuts in Medicare, Medicaid, Social Security, and possibly the military. This has become routine, whenever there's a Democrat in the White House and a Republican majority in either house of Congress (oddly enough, Republicans had no objection to suspending the debt limit altogether three times during the Trump administration). One of these standoffs, in 2011, led to the US's bond rating being downgraded from AAA to AA+, for the first time in history. If a deal were not reached, and the US actually started not paying its bills, one assumes its bond rating would drop still farther, and it would have to pay even higher interest rates. (Which may be the Republicans' goal: if we make it really expensive for the US government to borrow money, it won't borrow money and therefore won't be able to spend money, after which we can drown it in a bathtub.)
The people in favor of this hostage-taking scenario, with the US economy (and a good deal of the world economy) as the hostages, say they're acting in the name of fiscal responsibility, to bring down the Federal budget deficit. "Brinkmanship now is the only thing that can save us from catastrophe," as Trump economic adviser Kevin Hassett says.
Ironically, the Federal budget deficit was actually doing pretty well before they started this drama. According to the New York Times this week, the US's nominal budget deficit was cut almost in half from 2021 to 2022, from $2.6 trillion to $1.4 trillion. (A different site gives slightly different numbers: $1.4 trillion in 2022, down from $2.8 trillion in 2021 and $3.1 trillion in 2020.) The nominal deficit is still above what it was in 2019, pre-Covid, but not by much -- and some of that is because the dollar is worth 15% less than in 2019.
The inflation-adjusted Federal budget deficit looks even better. From my Federal deficits Web page, we get
(These deficits are calculated by subtracting one year's inflation-adjusted national debt from the next's. The drastic drop in the past two years has been largely due to inflation, but that doesn't make it any less "real".)
In other words, Federal budget deficits are already dropping like a stone, so Republican will threaten to destroy the economy unless they drop the way Republicans want rather than the way Democrats want.
The people in favor of this hostage-taking scenario, with the US economy (and a good deal of the world economy) as the hostages, say they're acting in the name of fiscal responsibility, to bring down the Federal budget deficit. "Brinkmanship now is the only thing that can save us from catastrophe," as Trump economic adviser Kevin Hassett says.
Ironically, the Federal budget deficit was actually doing pretty well before they started this drama. According to the New York Times this week, the US's nominal budget deficit was cut almost in half from 2021 to 2022, from $2.6 trillion to $1.4 trillion. (A different site gives slightly different numbers: $1.4 trillion in 2022, down from $2.8 trillion in 2021 and $3.1 trillion in 2020.) The nominal deficit is still above what it was in 2019, pre-Covid, but not by much -- and some of that is because the dollar is worth 15% less than in 2019.
The inflation-adjusted Federal budget deficit looks even better. From my Federal deficits Web page, we get
| Fiscal year | Deficit in 1983 dollars |
| 2016-2017 | $147 billion |
| 2017-2018 | $279 billion |
| 2018-2019 | $325 billion |
| 2019-2020 extrapolated from pre-Covid months | $721 billion |
| 2019-2020 actual | $1504 billion |
| 2020-2021 | $47 billion |
| 2021-2022 | $24 billion |
(These deficits are calculated by subtracting one year's inflation-adjusted national debt from the next's. The drastic drop in the past two years has been largely due to inflation, but that doesn't make it any less "real".)
In other words, Federal budget deficits are already dropping like a stone, so Republican will threaten to destroy the economy unless they drop the way Republicans want rather than the way Democrats want.
