Politics, in times of crisis, surely makes for strange bedfellows. That was clearly evident in the recent debt-ceiling deal, which won with a bipartisan majority in both the Senate and the House, albeit with more Democratic votes than Republican. In the Senate, 46 Democrats and independents combined with only 17 Republicans to put the deal over the top. The vote in the House had 165 Democrats joined by 149 Republicans, with 46 Democrats and 71 Republicans voting against. The vote was clearly one that was opposed by Freedom Caucus Republicans and Progressive Democrats—for, of course, diametrically opposed reasons. The former want less spending, regulation, and taxes, and the latter want more of all three.

The bipartisan middle secured a two-year moratorium on fixing the debt-ceiling problem, which means that the topic will be front and center after the presidential election of 2024, and this could well lead to a sharp switch in one direction or the other. As a political matter, I think that both sides did the right thing when they chose to blink and pass legislation that neither really wants. Each side is in position to claim victory on a far-ranging deal, tendentiously labeled the Limit, Save, Grow Act of 2023, which might not, when all is said and done, achieve any of those goals. This complex statute resists any easy summarization, but the one provision that looks most relevant to a spending bill calls for an automatic 1 percent reduction to all spending programs if the parties cannot reach an annual budget in a timely fashion. That provision is augmented by attempts to rein in spending, deal with the efforts to scoop back the “unobligated coronavirus funds,” “prohibit unfair student loan giveaways,” and expand offshore oil and gas leasing, tightening work requirements for receiving food for people under fifty-four and able-bodied adults who have no dependents at home, and greenlighting the Appalachian natural gas pipeline. Yet there is a $45 billion allocation for dealing with toxic conditions for veterans, which is no mere rounding error, even with today’s stratospheric budget allocations. It was some achievement for the two sides to craft a complex bill that ranged so widely on topics, but no one should be under the illusion that the bipartisan process shall continue after the next election.

President Biden issued a clever victory statement that held out an olive branch to Republicans for coming to the table, only to add that his victory comes from keeping key issues off the table. Thus, he was adamant that his program contained no cuts with respect to Medicare, Medicaid, or Social Security, which to his mind have become not benefit programs but firm entitlements that the government has the obligation to fund, come hell or high water. There is a real risk in taking this hard-line position in light of the precarious financial situation of all these entitlement programs. The Social Security program is expected to run out of money one year sooner than expected, by the year 2034. At that point, the benefits are cut to 80 percent unless additional tax revenues are raised to close the gap. The situation could improve markedly if the economy expands, as is evidenced by the strong labor numbers just released, but underlying uncertainty about world events in Ukraine, the Middle East, and the Taiwan Strait change the picture radically. Medicare is even more precarious: the Hospital Insurance trust fund could be depleted by 2028. The program spends more than it receives in receipts, leading to the need to tap into the trust fund—a need that will only increase with time. Indeed, the current deal, which keeps Medicare off limits, means that nothing will be done within the framework to try to rationalize and restrain a program that constitutes 20 percent of national expenditures on health and 12 percent of the federal budget.

Thus arises this nasty impasse. The Republicans who did not sign on to the deal are regarded as scolds for warning of financial ruin. But the champions of the deal in both parties have let the opportunity for reform slip, a move that will only compound the problem down the road. And it is here that the great uncertainty arises. We know what will happen if the Democrats retain the presidency and the Senate: the status quo, which means the nation will be up against another debt-limit crisis, with the need to return to the bargaining table to make a second deal more austere than the first.

But there is at least some chance that the Republicans get both houses and the presidency—an iffy proposition at best. If they do, the landscape will shift dramatically in favor of a smaller government. The center of the Republican Party would move toward the Freedom Caucus, because it is likely that House Speaker Kevin McCarthy would gravitate in that direction, since he would have far less need to compromise with Democrats. But the road is still bumpy because this is indeed a nation that does not want to lose its major welfare programs, and it is always hard to knock out an established program on which there are great reliance costs. It is not possible to have individuals over sixty-five, or even near that age, make alternative arrangements that could have (and should have) been done if they had an additional twenty years to make those adjustments.  It was precisely those huge transition costs that doomed George W. Bush’s effort to reform Social Security in 2005, and the same forces are going to be operative now. So, the better approach is to look at management efficiencies in the hope of limiting the number of entitlement cuts that will meet with fierce resistance, no matter how necessary.

Biden is unrelenting on these points, praising the program because it leaves untouched “the core pillars of my Investing in America agenda that is creating good jobs across the country, fueling a resurgence in manufacturing, rebuilding our infrastructure, and advancing clean energy.” Biden always looks at these issues as if redistribution, rather than increased output, is the signal objection. When he talks about “good jobs,” he means “good-paying union jobs” backed by public funding. But those good-paying jobs simply protect the monopoly power of unions that introduces labor market rigidities and the risks of strike and lockouts, while increasing union clout on zoning restrictions and import restrictions.

To be sure, he is met with serious opposition, including a most welcome recent Supreme Court decision that gives no sway to union vandalism as a tool to promoting labor interests in industrial disputes. But there are thousands of ways that the Biden administration, through NLRB decisions, can push the union cause, which can undermine overall productivity.

The union influence is also manifested (and this is all too often a bipartisan trend) in imposing trade restrictions that hamper free trade across state and national borders. Promotion of infrastructure can become a source of pork, and again of union power. But at the same time, the broad restrictions on the construction of pipelines (outside the lone Appalachian pipeline) are one area where unions (in another instance of strange bedfellows) are indeed correct. These obstacles to construction rely on fundamental reworking of environmental laws, so that those laws no longer posit remote and improbable contingencies as reasons to stop the creation of new benefits in the construction of railroads, airports, and other major facilities.

The recent wetlands decision in Sackett v. EPA represents an important step in the right direction, but one that needs a lot of further work to avoid the massive waste of resources to stop important projects whose environmental impacts, if any, are far better dealt with once the project has begun, when greater knowledge and newer technologies can usually provide better solutions.

And last, there is the energy piece of the game, where the Biden administration is all in on combating the supposed crisis of global warming, as if it were all due to increases in carbon dioxide levels, when, if it occurs at all, is often attributable to a multiplicity of causes. The all too abrupt shift toward renewable energy, propelled by executive orders attacking fossil fuels, is destructive of both national energy markets and the rule of law.

At this point, the Biden administration is tied down by substantial resistance from a deadlocked Senate, a Republican-dominated House, and a skeptical Supreme Court. But a Democratic sweep in 2024 will lead to deficit negotiations that will look a lot worse than the current ones.

© 2023 by the Board of Trustees of Leland Stanford Junior University.