The United States will pay its bills. The U.S. is highly unlikely to default on the national debt , at least not for more than a short period. An agreement will be reached between the White House and Congress .

Unfortunately, that agreement will be hollow.

Raising the debt ceiling is a political chess match, and the people are the pawns. Democrats are addicted to spending and increasing the size of government. They want to replicate the failed European model of a social welfare state. Republicans, too, are addicted to providing government benefits to their favored constituencies in agriculture, carbon-based energy, and the military-industrial complex. Republicans are also addicted to cutting taxes. While there are strong economic arguments in favor of cutting taxes on businesses, individual tax cuts do not pay for themselves.

What can we expect from any agreement?

Well, a deal to cap social welfare spending will prove ephemeral. In an era of relatively high inflation, which according to the Federal Open Market Committee will be the case through 2024, the pressure to raise social welfare spending will become irresistible. Inflation will force an increase in spending on food stamps and veteran benefits, for example.

At the same time, Sen. Elizabeth Warren (D-MA) and other liberals are already pushing for more social welfare legislation. In addition, Republicans are already making the case for extending the temporary tax cuts from the 2017 Tax Cuts and Jobs Act. Most provisions of the Tax Cuts and Jobs Act expire at the end of 2025, including cuts in individual tax rates and brackets. Cuts in corporate taxes and capital gains taxes do not expire. Extending the individual tax cuts would blow a hole in our year deficit forecasts, raising the 2050 debt-to-GDP ratio from 226% to 261% .

The most important lesson to draw from the debt ceiling negotiations is that it is all a charade. Honest Republicans would explain that tax cuts for individuals do not pay for themselves. Honest Democrats and Trump-aligned Republicans would be honest if they explained that entitlement spending on Social Security and Medicare is crowding out spending on every other necessary government function.

To cut the Gordian knot of perpetual deficits, reform taxes and rein in entitlement spending.