Debt Ceiling Theatrics Hide the Truth of GOP Spending

On Thursday, January 19, 2023, the United States hit the debt ceiling, a limit on federal borrowing first established by a war-wary Congress in 1917. These days, the debt ceiling offers the GOP an opportunity for political theater. Speaker of the House Kevin McCarthy went on Fox News to threaten the Biden administration that without as-yet unspecified cuts, his slim Republican majority would shut the government down and choose economic chaos.

McCarthy’s explanation for why this was necessary? A government budget is like “our own household,” he explained. “If you had a child, you gave them a credit card, and they kept hitting the limit, you wouldn’t just keep increasing it. You first say: ‘What are you spending your money on? How can we cut items out?’ Every government has to do this, every state has to balance their budget, every county, city.” McCarthy proposed to Biden on air that they sit down and “look at places to change our behavior.”

Does the comparison between the federal budget and the average American’s  household finances sound familiar? It should: This simple but inaccurate wisdom has been a Republican talking point for more than 40 years.

Republican debt-ceiling theater is particularly annoying to experts. “To any economist or historian, it’s like the sound of fingernails scraping on chalkboards,” said my New School colleague, labor economist Teresa Ghilarducci. And as Paul Krugman explained in 2013, “An economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending, and earning go together: My spending is your income; your spending is my income.” Why does this false analogy have legs if it isn’t true? 

While government spending feels abstract, money is an emotional subject, and anxiety about household finances is all too familiar for many Americans. Many of us who can pay our bills on time still have debt. Borrowing is a convenience and sometimes a necessity: taking out a home loan is a way to build wealth, and a car payment makes commuting to work and school possible. And not having a credit card seems unthinkable: only 15 percent of Americans never shop online.  

But even good debt causes anxiety in families. What if you get behind on that mortgage, as more than 7 million Americans did in the pandemic’s first year? Half of Americans also owe a combined $1.75 trillion in education loans; almost 40 percent of those debtors are afraid to borrow more to finish their degrees. Twenty percent of Americans are on the hook for $88 billion in unpaid medical bills. And those credit cards that families use to pay for groceries, gas, unpaid utility bills, and other necessities? According to one lender, Americans owed $925 billion at the end of 2022, a 15 percent increase in one year.

It’s no wonder, then, that McCarthy’s false comparison between a national budget and a household budget probably caused millions of Fox News watchers—who don’t know (or don’t want to know) how much they rely on federal dollars—to shout, “Hell, yeah!” at their TV screens. But the analogy is also embedded in a bigger American tradition: The idea that a nation itself is a family, and some family members are more economically virtuous than others. 

The Debts of the Founding Fathers

In 1776, a family analogy helped colonists articulate their economic and political independence from England as just and natural. And as the dead were still being collected for burial at Gettysburg, Pennsylvania, 87 years later, President Abraham Lincoln spoke of these revolutionaries as “fathers” who “brought forth on this continent a new nation, conceived in liberty.” 

But the purported economic virtue of these founding fathers hid another reality. This national family was based on the economic exploitation of enslaved Africans purchased on credit, as well as speculation on Indigenous lands expropriated through displacement and murder. As importantly, the new nation was born in debt: the founding fathers borrowed $43 million to fight a revolution. The first Secretary of the Treasury appointed in 1789, Alexander Hamilton, pushed to borrow more to meet the government’s obligations and pay for internal improvements. “A national debt, if it is not excessive, will be to us a national blessing,” Hamilton pointed out as he cheerfully ran up the bill to $77.1 million over the next two years.

But this thrifty, virtuous, national family, one in which white male politicians and white male citizens were harmoniously aligned, relied on conjuring spendthrift others who needed economic discipline. While Thomas Jefferson wrote that Native Americans were “in body and mind equal to the white man,” he also maintained that integration into Euro-American economic life—giving up migratory patterns and adhering to systems of private property and commerce—was their only route out of “savagery.”  Until 1839, women were not entitled to keep their wages, permitted to own property or inherit directly. Before the Civil War, even free Black Americans had little access to commercial credit. After 1865, the former Confederate states passed so-called “Black Codes” that forced emancipated African Americans to show proof of work or be imprisoned as forced laborers leased by the state to whites. 

Not all families are created equal

Well into the 20th century, the “family” that reflected an economically sound American nation was implicitly white, ruled by a male head of household. It was in direct contrast to most Americans—poor, of color, immigrant, and indigenous—who were always perceived as lacking in economic discipline and moral sensibility. 

But by the 1930s, as he sought to pull the nation out of fiscal collapse at least partly caused by borrowing on the part of consumers and the finance sector, President Franklin Delano Roosevelt imagined a new relationship between home economics and the national economy. The government, he argued, following economist John Maynard Keynes, could borrow on behalf of the public, injecting money into the economy that would allow Americans to earn and spend. 

New Deal legislation authorized federal spending to put husbands to work, provide pensions for the elderly, widows with children, and the disabled, and create housing for workers. After 1945, an expanded version of this theory, the G.I. Bill, prevented a post-war recession. It also sought to create a nation of economically stable families, boosting millions of formerly working-class Americans into an educated middle class and creating a nation of homeowners with mortgages who raised families in sprawling suburbs.

Conservatives today, like Kevin McCarthy, look back on those post-war years as a period of harmony and stability. But at the time, conservatives openly abhorred liberal  tax policies and federal debt as a drift toward socialism. In 1964, Republican presidential candidate Barry Goldwater characterized Democratic policies that were shifting to address entrenched African American poverty, as a “swampland of collectivism,” “bread and circuses,” and proto-Communist “centralized planning.” University of Chicago economist Paul Snowden went further: To do for Americans what they did not “want to do for themselves” risked further eroding “the capacity of the ordinary man to provide for his own needs.”

Conservatives’ fears came true: Democrats were determined to address historic inequities by accelerating federal spending and federal debt. Two months after Goldwater lost the election, President Lyndon Baines Johnson authorized a breathtaking expansion of federal spending that he dubbed the Great Society.  

But Goldwater supporter and former actor Ronald Reagan, who became governor of California in 1967, took up the conservative cause of reining in federal debt and arguing that government programs harmed families. He fought welfare and proposed “workfare” programs to lift up the poor through hard work at minimum-wage jobs. Reagan portrayed the relationship between a free-spending government and aid recipients as not just spendthrift, but as a mutually assured corruption. In 1976, during Reagan’s first presidential campaign, he told stories about a so-called “welfare queen.” Based on Linda Taylor, a real person whose story Reagan massaged to depict social programs paid for by federal dollars as the epitome of government and Black familial dysfunction, he deplored a system underwritten by “`hardworking people’ who pay their bills and put up with high taxes.”

Reagan rode this mythic parable of linked government and family failure all the way to the White House in 1980. Three months later, he extended the metaphor in his first national address on the economy, in which he argued that only a tax cut would bring an “out of control” Congress to its senses. “You know, we can lecture our children about extravagance until we run out of voice and breath,” Reagan opined. “Or we can cure their extravagance by simply reducing their allowance.”

The debt cycle continues

This is a turning point for the rhetoric Republicans are currently using, yet contains an important lesson for the present. Reagan slashed social spending, a policy shift that earned him high approval ratings. But not surprisingly, tax cuts, coupled with enhanced military spending, further bloated the federal “family budget.” By 1988, the $1 trillion debt Reagan had inherited had ballooned to $2.6 trillion. Reagan’s successor President George H.W. Bush approved budgets that required even more spending: By 1992, the debt had climbed up to $4.4 trillion.

A familiar pattern asserted itself in the Reagan and Bush years that has held ever since. Republican leaders who decry federal debt as extravagant government spending that no well-functioning household could sustain, hide increased spending behind family values rhetoric. 

In the 1990s, Speaker of the House Newt Gingrich’s ten-point Contract With America enacted “fiscal responsibility” in government by attacking poor families: slashing social welfare programs, “prohibiting welfare to minor mothers,” enacting workfare, and redirecting the savings to prison construction and policing. In the summer of 1995, Gingrich threatened to literally pull the nation’s fiscal house down by refusing to raise the debt ceiling and threatening a default on the nation’s financial obligations—similar to the one McCarthy is holding over Biden.

Yet, to use the family budget metaphor, once Gingrich’s theatrics had forced cuts in social programs from President William Jefferson Clinton, the Speaker whipped out the proverbial credit card and launched one of the biggest spending binges in American history.

Today, House Republicans are putting on the same show, but as Ghilarducci points out, family budgets and federal budgets have one crucial difference. As Hamilton understood in the 1780s, a healthy economy requires the government to borrow and spend, particularly on the least fortunate, but it requires families to spend and save. 

“What has been ignored throughout the debt debate is how important a government running a deficit is to a modern market economy,” Ghilarducci explains. “All business investment depends on anticipated future sales and confidence that the economy will grow. But that market economy also requires households to save for short, medium, and long-term goals so they can avoid debt that will drag down the economy.” 

In other words, nations should borrow, while people should live within their means.

Yet, this is the political world we currently live in: Republicans cast themselves as the champions of practical and thrifty Americans while they use a national debt that their own presidents and congressional majorities have plumped up to enact an ideological agenda that has nothing to do with how family economies—or national ones—really work.