Kevin McCarthy says Republicans would ‘protect’ Social Security. What does that mean?
WASHINGTON — Some Republicans have said that once they control the House of Representatives, they would seek to partially balance the federal budget by cutting Medicare and Social Security.
But at the first press conference in his new role this week, House Speaker Kevin McCarthy (R-Calif.) couldn’t provide details on their plans for the popular retirement programs.
“One thing I will tell you, as Republicans, we will always protect Medicare and Social Security,” McCarthy said Thursday in response to a question from HuffPost. “We will protect them for the next generation. But we will scrutinize every dollar spent.”
Everyone in Washington wants to “protect” or “strengthen” Medicare and Social Security; It’s a perfectly harmless statement that any member of any party could utter at any time without thinking.
McCarthy’s response suggests that Republicans don’t have a plan just yet, and that his biggest challenge will be getting his recalcitrant caucus — which only elected him chairman on the 15th ballot — to converge on a unified list of demands some.
The alleged threat to the programs is the future date when their trust funds will run out, likely resulting in automatic benefit cuts as incoming revenue will be less than the government’s expected expenditure on benefits. Democrats generally prefer to close the gap by raising taxes, while Republicans would prefer cutting welfare payments. Neither party has shown much urgency, however, as Medicare can pay full benefits by 2028 and Social Security by 2035.
But Republicans have said they want to use their new majority in the House of Representatives to launch a major fight over the entire federal budget this year. And they already have a hostage: the government’s ability to borrow money and pay their bills.
Sometime this year, Congress will need to raise the “debt ceiling” — the legal limit on how much the Treasury Department can borrow to pay for spending that Congress has already authorized, including on things like Social Security.
While it’s unclear when the Treasury Department will run out of credit and be given the choice of not paying debtors or those owed to the government, Secretary of State Janet Yellen gave the go-ahead on Friday. In a letter, she told senior party leaders on Capitol Hill that she expects the nearly $31.4 trillion mark to be reached on Jan. 19.
A possible consequence of breaching the debt ceiling? Social Security recipients could miss monthly checks.
Yellen said the Treasury Department is clear until at least “early June,” but the end date may not come until late summer. That’s because the Treasury will be receiving a glut of tax revenue in the coming months amid income tax filing season, and it will have a pot of accounting maneuvers to employ – “extraordinary measures” – once it hits the limit. These will give him several hundred billion dollars more in rental space.
Lou Crandall, chief economist at research organization Wrightson ICAP and government bond market watcher, recently put the default date at sometime in August.
Nancy Vanden Houten, a US economist with research group Oxford Economics, predicts that the drop-dead date will come sometime in the third quarter of the year from July to September. She also noted that window means it could easily get caught up in a likely fight over keeping the government open. Without new funding, or at least a temporary stopgap law by October, the government would be forced to shut down all but essential functions.
“Given our current projections, there’s a good chance that the need to raise the debt ceiling will be entangled with the need to pass annual spending bills to avoid an Oct. 1 government shutdown,” Vanden Houten said in a research note.
McCarthy reiterated Thursday that Republicans would use the debt ceiling to negotiate unspecified spending cuts, likening his plan to good parenting.
“If you have a kid and you give them a credit card and they spend the limit, so you keep increasing the limit — when does it end?” he said. “We need to change the way we spend lavishly in this country.”
(The credit card analogy is common but odd. Congress authorizes spending and sets the limit, and the legislature does so with full knowledge that spending already approved will eventually exceed it. The limit is arbitrary and not based on an estimate of the pay for nation skills.)
So what will Republicans ask for? While they didn’t band together around actual demand, their position on Medicare and Social Security isn’t entirely a mystery. The Republican Study Committee, a policy-oriented group of House members that produces legislation, last year proposed raising the retirement age for both Medicare and Social Security, cutting monthly payments for higher earners, and turning Medicare into a “public-type” program Option” that competes in a market with personal insurance plans.
Rep. Jodey Arrington (R-Texas), the new chair of the House Budget Committee — a possible starting point for Republican spending calls — has said he supports raising the age of participation for both programs. He told HuffPost he hopes to work with Democrats to get the kind of bipartisan big deals that were more common in the 1980s and 1990s.
Arrington acknowledged that cutting Social Security spending may be unpopular, but Republicans think the conversation needs to go there.
“There are a lot of tough decisions that we all have to make across the board,” Arrington said. “The rubber will take to the streets with the real decisions about bucking the spending curve and reforming programs.”
It’s possible that Republicans are only targeting softer targets, such as funding federal agencies. Rep. Chip Roy (R-Texas), one of the far-right Freedom Caucus members who refused to endorse McCarthy as a speaker unless he promised to crack down on Democrats, told Republican strategist and radio host Hugh this week Hewitt that there could be a “long-term conversation” about Social Security and Medicare after Republicans “smashed and burned” some federal bureaucrats with cuts to nondefense discretionary spending.
Even if Republicans shy away from touching pension benefits, the debt ceiling standoff will be ugly. The atmosphere is already more charged than it was at the same time in 2011, when a Republican house was trying to negotiate a debt ceiling increase with a Democratic Senate and the White House.
That episode began with then-Speaker John Boehner (R-Ohio) trying to get his new majority – made possible by the Tea Party wave – to agree on what to seek in exchange for the debt ceiling being lifted target. Speaking in New York City in May, Boehner called for trillions in “actual cuts and program reforms,” a sum that would have been more than one debt hike.
But as the summer wore on and it became clear that neither an all-cut deal nor a big bargain mix of spending cuts and tax hikes could be struck, the fallback was to introduce annual discretionary spending caps that Congress approves each year — the smaller things outside of Social Security, Medicare and Medicaid — in exchange for raising the debt limit in steps that Congress would have to vote to remove.
These caps only worked as intended for the first year and were then relaxed in a series of biennial budget agreements, having only a modest effect in restraining spending.
The most important immediate impact of the 2011 episode was that the rating agency Standard & Poor’s downgraded the US credit rating for the first time ever.
Today, Democrats have so far adopted the position President Barack Obama took in 2013 when he refused to continue negotiations on the debt ceiling. “They don’t reward those who hold the debt ceiling hostage,” top Budget Committee Democrat Rep. Brendan Boyle (D-Pa.) told HuffPost.
Boyle expects Republicans to blink like they have at previous debt ceiling showdowns. “We have managed to raise the debt ceiling every time. And I think this story will continue,” he said.
On the Senate side, Democrats have little patience to give way to House Republicans. Sen. Sheldon Whitehouse (DR.I.), a senior member of the Senate committee responsible for Social Security and Medicare, said, “We shouldn’t be negotiating with MAGA extremists in the House for full trust and full recognition by the United States.” – a reference to the extreme right wing of the party. The threat of insolvency is clear.
Proposals to cut Social Security spending, such as by raising the retirement age, are political poison as polls show most retirees count on the system as their main source of income. That’s why former Republican Speaker Paul Ryan (R-Wis.), a veteran of previous showdowns, said this week that so-called entitlement reform “takes time” and cannot be handled in a single debt ceiling standoff.
Arrington, the budget leader, made a similar remark: “Timing is very important — proper leadership and aligning public sentiment with what we need.”
But Roy and his faction have tried to be disruptive, and House Republicans weren’t afraid to get caught up in an unpopular token vote this week on limiting abortion access. The Freedom Caucus member said it was good that Republicans almost had a physical altercation on the House floor during McCarthy’s election for speaker.
“We need a little bit of that,” Roy said on CNN. “We need a little bit of that kind of glass-breaking to bring us to the table so we can fight for the American people and change the way this place is dysfunctional.”