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Trump, the road to serfdom, and the debt ceiling

Summary:
During last night’s CNN “town hall” fiasco Trump had this to say about the debt ceiling: Former President Donald Trump on Wednesday urged Republican lawmakers to let the United States default on its debt if Democrats don’t agree to spending cuts. “I say to the Republicans out there — congressmen, senators — if they don’t give you massive cuts, you’re going to have to do a default,” said Trump, who is again running for president. “And I don’t believe they’re going to do a default because I think the Democrats will absolutely cave, will absolutely cave because you don’t want to have that happen. But it’s better than what we’re doing right now because we’re spending money like drunken sailors.” When pushed by CNN anchor Kaitlan Collins to

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During last night’s CNN “town hall” fiasco Trump had this to say about the debt ceiling:

Former President Donald Trump on Wednesday urged Republican lawmakers to let the United States default on its debt if Democrats don’t agree to spending cuts.

“I say to the Republicans out there — congressmen, senators — if they don’t give you massive cuts, you’re going to have to do a default,” said Trump, who is again running for president. “And I don’t believe they’re going to do a default because I think the Democrats will absolutely cave, will absolutely cave because you don’t want to have that happen. But it’s better than what we’re doing right now because we’re spending money like drunken sailors.”

When pushed by CNN anchor Kaitlan Collins to clarify his remarks, Trump said: “Well, you might as well do it now, because you’ll do it later. Because we have to save this country. Our country is dying. Our country is being destroyed by stupid people, by very stupid people.”

This is deeply troubling on at least two levels.  First, Trump’s rhetoric will make it more difficult for Republicans in Congress to reach agreement with Democrats on a measure to raise the debt ceiling and thus increases the risk of a catastrophically bad outcome.

The road to serfdom meets the debt ceiling

The point I want to emphasize, however, is that Trump’s muddled argument is superficially plausible.  There is widespread agreement among elites that current and projected deficits are too high.  Trump is wrong to claim that we face a dire emergency and need to do something immediately.  But fear-mongering works.  People are loss averse, and certainly they are catastrophe averse.  Trump is making a bullshit argument, but it may be good enough for Republicans to lay the blame for a default on Biden and the Democrats:  “we had no choice, we were on the road to ruin anyway”.  Republicans use this kind of road to serfdom logic because it is persuasive.  And this persuasiveness will put pressure on Biden and the Democrats to settle on terms that are more favorable to the Republicans than they would otherwise have to.

It’s all about Social Security, Medicare, and Medicaid

To gain political leverage, Democrats and President Biden need to reframe the debate to focus on the long term, and on the future of the major social insurance programs. 

They need to acknowledge that we will probably need to raise revenue or cut spending over the next three decades as the population ages.  They need to bash Republicans for not putting Social Security, Medicare, and Medicaid on a secure financial footing.  Accuse them of setting these programs up for failure by running up deficits.  Instead of explaining how they propose to deal with the looming shortfall in the Social Security and Medicare trust funds, the Republicans have proposed harsh cuts in programs for the poor and for veterans healthcare.  They want to reduce the ability of the IRS to audit the tax returns of the ultra-rich, which is unfair and will only reduce revenue and create more pressure for cuts in programs that ordinary people rely on.  And nothing Republicans are proposing will have a significant effect on deficits, which reflect long run demographic changes and changes in health care costs that Republicans do not address.

In all likelihood, we really will need to make significant adjustments to our fiscal policies over the next few decades, and there is a good case to be made for starting sooner rather than later.  Democrats can seize the high ground by acknowledging this and defending highly popular programs from Republican attack.

Defying the Supreme Court

Finally, Gerald Magliocca has an interesting paper on how Roosevelt prepared to defy the Supreme Court if the Court overruled Congress and insisted that contracts denominated in gold had to be repaid in gold, despite the deflation of the great depression.  A lesson for our times.

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