News Release

Debt Ceiling: Why the Democrats Keep Doing Groundhog Day



Ferguson is professor emeritus at the University of Massachusetts Boston, research director at the Institute for New Economic Thinking, and senior fellow at Better Markets.

Jorgensen is associate professor and director of environmental studies at the University of Texas, Rio Grande Valley.

They just co-wrote the piece “No Bargain: Big Money and the Debt Ceiling Deal” with Jie Chen which recalls “President Obama’s famous attempt at a ‘grand bargain’ with Republicans in 2011 — an episode in which then Vice President Joe Biden played a key role. That ratified major Bush-era tax cuts and severely impacted federal spending for years, likely contributing to the voter disaffection with Democrats that became dramatically evident in 2016.”

They also note a recent New York Times editorial which observed that “Democrats could have voted to eliminate the debt ceiling between the fall elections and January, when Republicans took control of the House, or they could have voted to provide the government with sufficient borrowing capacity until the next congressional elections in 2024. Instead, they chose this confrontation. Mr. Biden last fall labeled proposals to eliminate the debt ceiling ‘irresponsible.'”

They continue: “In public the White House conducted talks only with House Speaker McCarthy, leaving out Democrats in both houses. Meantime Senate Majority Leader Charles Schumer, whose political career has been coterminous with New York City’s ascent as the capital of world finance, made noises about wanting a bipartisan deal. …

“The White House was not caught off guard.” The showdown over the “debt ceiling was pre-programmed from the start. …

“The reason is simple: The dominating fact about American politics is its money-driven character. In our world, both major political parties are first of all bank accounts, which have to be filled for anything to happen. Voters can drive politics, but not easily. …

“The result is what we term the ‘linear model’ of U.S. congressional elections: to a stunning degree outcomes of elections between major party candidates are directly proportional to the amounts of money each raises and spends. This dependence is a feature, not a bug.” [The paper breaks down data with charts illustrating this point.]

They conclude: “Now the President is running for a second term. His fundraisers openly declare that the campaign intends to raise more than a billion dollars. In recent presidential elections, contributions from labor union amount to about 6 or 7 percent of total political spending. Money in the amounts the Biden campaign seeks can come only from one place: from the superrich and very affluent Americans. And in a Congress so dependent on money flows, relatively few representatives in either party are likely to do much more than posture when it comes to raising taxes. For Democrats in particular, the advantages of first actually passing programs, then standing back and reluctantly sustaining votes to take them back are a dream come true for squaring big money politics with folk appeal. That is the real reason Democratic party leaders go along with the debt ceiling ritual.”