Republicans and Democrats Face Impasse Over Cutting Spending Versus Raising Taxes

A Monday speech by House Speaker Kevin McCarthy (R–Calif.) and proposals President Joe Biden is expected to float in tonight's State of the Union (SOTU) address highlight the impasse Republicans and Democrats find themselves in over spending and debt. They also highlight absurdities in both parties' negotiating positions.

Biden wants to increase the U.S. debt ceiling—that is, the amount of outstanding debt the U.S. government is allowed to have—which already stands at a whopping $31.4 trillion. McCarthy-led Republicans in the House of Representatives say that's not happening without other spending cuts.

If we don't raise the debt ceiling, the federal government will not have enough money to pay off its obligations starting around June. This could set off a cascade of negative economic effects.

"Raising the debt limit is not about new spending; it is about paying for previous choices policymakers legislated," note Leonard Burman and William G. Gale for the Brookings Institution. But raising the debt ceiling without either cutting spending or raising more revenue simply ensures that we kick this can down the road.

Republicans want to fix this issue through deep cuts to federal spending. McCarthy reiterated this in a Monday speech.

"A responsible debt limit increase that begins to eliminate wasteful Washington spending and puts us on a path to a balanced budget is not only the right place to start, it's the only place to start," he said. "Now we must return Washington to a basic truth: Debt matters. The debt limit is one of the most important opportunities Congress has to change course."

Republicans say they won't raise the debt ceiling without spending cuts—a move Biden and Democrats are trying to portray as reckless and cruel, indifferent to the havoc that defaulting on obligations could wreak.

The absurdity in Biden's framing is that Democrats aren't simply helpless bystanders here. They could choose to compromise and cut spending and McCarthy and co. would go along with the debt ceiling increase. But Democrats, too, refuse to budge here.

The absurdity in the Republican position is that they refuse to consider cuts that might be politically unpopular, including cuts to Medicare, Social Security, or military spending. They have remained relatively vague—including in McCarthy's Monday speech—about where these cuts will be made and just how we'll move toward a more balanced budget.

In any event, "the White House has said it won't negotiate on the debt ceiling but is open to separate talks about reducing the deficit," notes The Wall Street Journal. And, as per usual for Democrats, Biden's side wants to do this by raising taxes.

In his SOTU speech tonight, Biden is expected to call for more tax increases. But like Republicans who refuse to consider cuts to popular entitlement programs, the Democrats are cowards here. Rather than admitting that the only way to fund their ever-expanding spending ambitions is through broad tax increases and other measures that will resonate across the board, Biden likes to pretend that we can fuel endless spending by simply wringing more money from the very rich.

"Under [Biden's] plan, no one making under $400,000 per year will pay more in taxes," the White House insisted yesterday, reiterating promises Biden made on the campaign trail and over the past two years. But a lot of experts disagree with this claim; at best, the calculation is unclear.

In tonight's speech, Biden is expected to again call for a "billionaire tax." He also wants to quadruple the amount of taxes companies pay when they buy back shares. From the Financial Times:

The newest proposal that Biden will unveil on Tuesday is the quadrupling of the 1 per cent excise tax on share buybacks, which was passed as part of last year's Inflation Reduction Act (IRA), and staunchly opposed by business. Biden administration officials have frequently blasted companies, including oil groups, for returning money to shareholders through buybacks rather than investing them in their communities or rewarding workers.

Biden will also reprise his attempt to enact a tax on billionaires' unrealised investment gains, which he had championed throughout 2022 but failed to secure in the final round of negotiations over the IRA following a backlash from some Republicans and moderate Democrats.

But, as the Times notes, "Biden's call for higher taxes on high-income households and big business has had only limited success over the past two years, when Democrats controlled both chambers of Congress, and will face even more resistance with a Republican-controlled House of Representatives."

FREE MINDS

"Geofence warrants are just part of day-to-day cop business these days," laments Tim Cushing at Techdirt. "Rather than moving forward with a list of suspects, law enforcement agencies just ask for data on everyone in a certain area at a certain time and move backwards to probable cause to investigate and arrest."

The FBI utilized geofence warrants in its investigation into January 6 protesters—one of whom challenged the use of these warrants in court, filing a motion to suppress data obtained through the warrant.

A court has now denied the motion to suppress. "The ruling [PDF] from the DC District Court does have a few problems with geofence warrants generally, but not this particular one," notes Cushing. "The court also says there's no expectation of privacy in anonymized location data. Referencing the Supreme Court's Carpenter decision, it says hoovering up massive amounts of data related to hundreds of devices isn't the same thing as harvesting data targeting a particular device over the space of days or weeks."

Cushing has more on the decision and on what it means here.

FREE MARKETS

Texas lawmakers want to ban some immigrants from buying property. Reason's Fiona Harrigan has more details:

As it currently stands, Texas law guarantees that "an alien has the same real and personal property rights as a United States citizen." That might not sound controversial—but a new bill is seeking to add some major exceptions.

Senate Bill (S.B.) 147, introduced in November by state Sen. Lois Kolkhorst (R–Brenham), would bar any "individual who is a citizen of China, Iran, North Korea, or Russia" from buying property in Texas. S.B. 147 would also block government and corporate entities of those nations from purchasing or acquiring property in the state. Last month, Texas Gov. Greg Abbott announced that he would sign the bill if passed.

When she introduced S.B. 147, Kolkhorst cited "highly disturbing" instances of foreign entities buying property in Texas and elsewhere in the United States. But certain aspects of the legislation are themselves disturbing, and its vague wording leaves the door open for dubious state action—including against citizens who have nothing to do with the evils of their governments.

Texas Gov. Greg Abbott has said that he will sign the bill if it passes.

QUICK HITS

New: Columbus designed a Black History Month cop car and put an MLK quote on it, "Be the peace you wish to see in the world." No historian I talked to, including the founding director of the King Papers Project, has ever seen this quote. https://t.co/w9zjpVpVeq

— Paul Blest (@pblest) February 6, 2023

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