WASHINGTON — Republicans say the national debt is one of the greatest threats to the United States of America, but they’re only halfway willing to fight it.
The U.S. government has borrowed $31 trillion in order to cover annual budget deficits resulting from a near-constant mismatch between spending and tax revenue. Congress could slow the growth of debt by cutting spending and raising revenue, but Republicans have ruled out the latter.
“We’re not going to raise taxes,” House Speaker Kevin McCarthy (R-Calif.) said Monday. “We have more revenue coming into government in a 50-year average than any other time in history, only two other times did we have a higher percentage.”
Republicans have refused to support a bill raising the debt ceiling, which would allow the government to continue borrowing to pay for basic operations, unless President Joe Biden agrees to spending cuts. The White House has privately proposed closing tax loopholes, such as the favorable treatment of investment fund managers’ income, as part of a broader deal, according to a source familiar with the negotiations.
It’s a high-stakes hostage situation — the government could default on its debts in less than two weeks, potentially destabilizing the financial system and skewering the economy.
McCarthy’s claim about record revenues is a little outdated. The historical average for tax revenue as a percentage of overall economic activity — a common metric for measuring the scale of the tax burden — is about 17.4%, according to the Committee for a Responsible Federal Budget, a nonpartisan think tank that hates budget deficits.
Tax receipts clocked in at about 20% of gross domestic product in 2022, but have been trending downward, and amounted to 17.7% of GDP in the past 12 months, according to more recent budget data analyzed by CRFB. So revenue has been coming in at the historically average pace.
“2022 was a fabulous revenue year, but it wasn’t indicative of a trend,” CRFB’s Marc Goldwein said in an interview, adding that inflation and lots of stock sales contributed to the surge of tax receipts last year.
McCarthy implied that having more revenue than the historical trend means the government has more than enough, but the historical trend, after all, was a key ingredient in the recipe for a $31 trillion national debt. McCarthy has called the debt “the greatest threat to our future.”
On spending, McCarthy’s on firmer ground.
“We are spending more than at any other time,” he said Monday. “We are now more than 24% of GDP spending when on the 50-year average we’re at 21%.”
Overall federal spending surged to 30% of GDP in 2020 thanks to the largely bipartisan response to the coronavirus pandemic. It’s trended downward since then as boosts to food benefits and Medicaid coverage expire. But spending has leveled out at an above-average rate, and the Congressional Budget Office has projected that outlays will remain elevated through the next decade as more older Americans receive benefits from Social Security and Medicare — programs McCarthy has said Congress won’t touch.
So spending is up. But even if it weren’t, it’s unlikely that fluctuations in revenue and expenses would make a difference to Republicans, who always favor tax cuts and always favor spending cuts when a Democrat occupies the White House.
“We have a spending problem. It’s not that the American people are taxed too little,” Sen. John Cornyn (R-Texas) told HuffPost last week. “I understand that the impulse of our friends on the left is to grow the government and raise taxes, but I think just the opposite is right. It’s the difference between Republicans and Democrats, if you haven’t noticed.”
The White House proposed a budget earlier this year that would significantly narrow deficits through higher taxes on corporations and the wealthy, but Democrats have not made higher taxes a prominent public demand in response to the Republican push for spending cuts attached to a debt ceiling increase. Instead, President Biden simply insisted that Congress pass a “clean” debt ceiling bill without any strings attached, and tax policy demands have been made in private negotiations.
In those talks, the White House has offered to freeze discretionary spending at current levels, but Republicans want spending to revert to a lesser amount, and they want “work requirements” restricting eligibility for federal food and health benefits.
“The fundamental issue here is the spending,” Rep. Patrick McHenry (R-N.C.) told reporters on Tuesday. “We have to spend less money next year.”