Hours before Friday's strong jobs report, the Senate sent the debt ceiling deal to President Joe Biden for his signature, defusing the economic bomb that would have resulted from the U.S. government’s defaulting on its debts. And while there were no winners, there was one clear loser: The far right can no longer sabotage the president — or the country.
Let’s be clear: This deal wasn’t a victory for anyone, any more than narrowly avoiding plummeting off a cliff is a victory for a driver. Democrats should have lifted the debt ceiling permanently last year and never let Republicans leverage threatening the American economy. Instead, we have an agreement that further tightens work requirements on hungry Americans. (Some will point to the Congressional Budget Office’s score that said newly exempted categories of people, such as applicants who are experiencing homelessness, will actually expand the food stamp program; experts are skeptical.) It cuts IRS funding, thereby reducing scrutiny of tax cheats (and increasing the deficit). It aggravates climate change by expediting one of the pet projects of Sen. Joe Manchin, D-W.Va. And it asks nothing in revenue from the wealthy or from the corporations that have made out like bandits, most recently under President Donald Trump’s 2017 tax cuts.
The truth is Biden’s economic record is strong — surprisingly so, judging by media coverage and polls of consumer sentiment.
Nor is it a “win” for House Speaker Kevin McCarthy, R-Calif., no matter what he claims. Yes, he is still speaker, and yes, the global economy isn’t on fire. But if the bar is that low, then it’s on the floor.
Recall that the Republicans’ opening bid in negotiations was set in stone months ago. Instead, McCarthy tried to get Biden to negotiate without committing his members to vote for any cuts — a failed stunt that gave the recent dealmaking an unnecessarily tight timeline. Though the deal McCarthy struck preserves the odious precedent of threatening default to negotiate, he won surprisingly few concessions given the scale of the threat. And while his opponents on the far right didn’t move to oust him, 70 of them voted against this deal, less than five months into his speakership. That’s not atypical for debt limit votes, but most speakers aren’t hanging on to their perches by such a slim margin.
But whether the far-right Freedom Caucus finally moves against McCarthy next week, month or year, the only good news coming out of this negotiation is that its members have lost their strongest weapon against Biden — and the U.S. economy. Before last week’s deal, Rep. Matt Gaetz, R-Fla., gave away the game, telling Semafor that he and his “conservative colleagues … don’t feel like we should negotiate with our hostage.” In saying that, he echoed Trump’s comments at last month’s CNN town hall: “If they don’t give you massive cuts, you’re going to have to do a default.”
Of course, the Freedom Caucus and its allies would insist they agree with Trump that the damage from a default is “really psychological more than anything else.” But if they really believed that, the threat of default wouldn’t hold any power. In fact, the reason they were so enamored of leveraging the debt ceiling is that default would create an economic downturn out of thin air, costing millions of jobs and destroying trillions in household wealth. No matter how well he navigated the fallout, Biden would most likely be wounded ahead of next year’s elections. No wonder Gaetz’s fellow fire-starter Rep. Chip Roy of Texas was so adamant in demanding that his fellow Republicans “hold the line” to extract concessions.
The truth is Biden’s economic record is strong — surprisingly so, judging by media coverage and polls of consumer sentiment. Glaring problems remain, of course. As the debt ceiling deal shows, the wealthy are rarely asked to pay their fair share for this growing prosperity. Life expectancy and prime-age employment rates lag those of other countries. And though inflation has fallen, it remains a problem, partly because of lingering supply shocks and corporations’ protecting their profits.
Any president would love to have these economic numbers heading into a re-election campaign.
But job creation remains strong, with 339,000 jobs added in May. So does gross domestic product growth, with first-quarter numbers being revised upward late last month. Unemployment sits at 3.7%, with April's rate of 3.4% the lowest peacetime rate on record. Hispanic unemployment is at 4.0%, barely above a record low of 3.9% set in September. Black unemployment in April hit 4.7%, the lowest ever measured. And low-income workers’ real wages grew more from 2020 to 2022 than in all of Barack Obama’s presidency. Even polls showing economic discontent can be misleading, most likely thanks to partisanship: According to Federal Reserve data, for example, even as most Americans say the economy is doing poorly, three-quarters of respondents say their own financial situations are fine.
The result? “America remains the world’s richest, most productive and most innovative big economy,” The Economist concluded this year. “By an impressive number of measures, it is leaving its peers ever further in the dust.” Adjusted for purchasing power, for example, the average income in Mississippi — the poorest state — is higher than in France.
Any president would love to have these economic numbers heading into a re-election campaign. With the Biden economy having weathered everything thrown at it so far, a sudden crash — while always possible — seems unlikely. When it comes to a presidential election, the fastest path to defeat for an incumbent is a bad economy — and until this week, the fastest path to a bad economy was a debt default. Without sabotage, Republicans have to beat Biden the old-fashioned way: by convincing voters that they’ll better manage the economy — even though they just threatened to wreck it.
