Outside the Beltway

A New Normal For Debt Ceiling Increases?

Has a precedent been set for future requests by the President to increase the debt ceiling?

Doug Mataconis · Wednesday, August 3, 2011 · 10 comments

Just before the Senate voted to approve the debt ceiling deal, Minority Leader Mitch McConnell spoke on the floor of the Senate and said this:

One of the most important things about this legislation is the fact that never again will any President, from either party, be allowed to raise the debt ceiling without being held accountable for it by the American people and without having to engage in the kind of debate we’ve just come through.

(…)

“This is no small feat when you consider that just last week the president was still demanding tax hikes as a part of any debt ceiling increase, and that as recently as May, the president’s top economic advisor said it was `insane’ for anybody to even consider tying the debt ceiling to spending cuts. It’s worth noting that two and a half months later, that advisor is longer working at the White House and the president is now agreeing, as a condition of raising the debt ceiling, to trillions of dollars in spending cuts.

While it’s difficult to predict the political future from one incident, Michael Shear of The New York Times thinks that, for better or worse, McConnell may just be right:

In the long term, it may be impossible for Washington to put the debt ceiling genie back in the bottle.

Why? Because in the end, hostage-taking works.

Future Republicans will no doubt look back on the debt ceiling fight of 2011 as a success. Whether conservative members got everything they wanted or not, it is hard to argue that they did not get more than they would have without the threat of holding up the debt ceiling increase.

“We’ve had to settle for less than we wanted, but what we’ve achieved is in no way insignificant,” Mr. McConnell said after the vote.

But it’s not only Republican members of Congress who might take advantage of the debt ceiling.

Given the proven power of the issue, it is not hard to imagine a future in which a Democratic minority finds it in their interests to advance a top priority by threatening to hold up a debt ceiling increase for a Republican president.

That would seem rather hypocritical for current Democrats, who all accused their Republican counterparts of playing fast and loose with the American economy. But politicians rarely worry too much about hypocrisy. And given enough time, political realities shift.

This is largely true. Now that we’ve seen that taking the nation to the brink of default over raising the debt ceiling can work to a parties’ political advantage, especially when dealing with a weak President who is a bad negotiator, there’s no reason to believe that they won’t try it again. Heck, let’s say that the President is re-elected but the GOP ends up with full control of  Congress. At some point in 2013 or 2014 we’ll have to talk about raising the debt ceiling again. Does anyone think we wouldn’t go through this all over again? Assuming Obama even bothered to fight that time, that is.

Jared Bernstein, who served as an economic adviser to Vice-President Biden and now serves as the head of a liberal fiscal policy think tank, debated this “new normal” with former New Hampshire Senator Judd Gregg on CNBC yesterday, and their exchange is worth watching:

Bernstein also addressed the issue on his blog later in the day:

To understand how nonsensical Sens McConnell’s and Gregg’s position is, you have to appreciate that Congress knows when they pass their budget whether it will breach the debt ceiling or not, just like you know when you order your lunch whether you’ll be able to pay for it.  They’re saying, I’m going to keep ordering lunches I can’t pay for and when the cashier hands me the check, I’ll hand it right back and tell her it’s her problem.

The budget process is when you square the ledger.  Or not—there will be budgets, especially in recession, that add to the deficit and breach the ceiling.  In such cases, Congress must borrow to make up the difference, and sometimes that will mean raising the ceiling, as we’ve done without incident since 1917.

But Sens McConnell and Gregg would rather pass budgets they knowingly refuse to pay for, and then threaten default.  You can call that budget discipline if you want.  But I’m telling you, this is not the way of great nations.

In the abstract, I think Bernstein has a good point here. As I wrote during the height of the budget negotiations, see here and here, the entire idea of a debt ceiling law is absurd to begin with. It would be better off if we eliminated it entirely or, barring that, adopting the practice that Denmark has, which is to set the debt ceiling so high that it would never become the kind of issue that the legislature would have to deal with every year or two in the manner that we’re used to.

The one thing that Bernstein’s analysis misses, though, is the fact that we never seem to deal with serious problems in politics until we’re on the brink of some kind of crisis, real or imagined. We knew for the better part of eight months that the debt ceiling would have to be raised, for example, and yet the Democrats chose not to even attempt to do anything about it while they had complete control of Congress. Does anyone really think that the Republicans would have fought a debt ceiling increase in December 2008 if it was tied to an extension of the Bush tax cuts? Personally, I think it would’ve been highly unlikely. And yet, Harry Reid chose not to even attempt it because, he said, he wanted the GOP to share the political pain of raising the debt ceiling.  If Reid had acted responsibly back then instead of playing partisan games, we might have been able to avoid the entieity of the pas six weeks.

Similarly, there’s been talk about restraining spending and cutting the long-term deficit for years, and yet nothing serious has been done by either party to address the situation. It wasn’t until we got to the brink of a possible default that action was taken on an imperfect package of modest cuts. Had it not been for the debate over the debt ceiling, we wouldn’t even be talking about a Joint Select Committee whose job it will be to comb through the Federal Budget looking for nearly $2,000,000,000,000 in additional budget cuts.

Just to be clear, I am not endorsing this governing-by-crisis scenario. It leads to unnecessary economic uncertainty, and usually leads people to make decisions under the pressure of impending events. Nonetheless, it seems to be the only way we can get things done in this country anymore. As with nearly every other previous budget, the appropriations bills for Fiscal Year 2012 remains mostly unpassed by Congress (the House has passed 6 of the 12 appropriations bills, the Senate has only passed one). The Senate hasn’t passed a budget plan in more than 820 days. It’s most likely that, like last year, we’ll find ourselves passing a series of Continuing Resolutions starting on September 30th as Congress finds itself unable to come to agreement on even simple budgetary matters.

Partisans will blame the opposing party for this situation, but it’s clear that this is a bipartisan failure. Republicans are unwilling to consider closing even the most obviously unnecessary tax loophole. Democrats are unwilling to talk entitlement reform despite the fact that its clearly necessary, and aren’t even willing to consider cutting the budget of entities such as NPR or the Corporation for Public Broadcasting, neither of which have any relationship at all to an essential function of government. As long as this continues, the only way to reach agreement on matters like this is when the parties absolutely have to, as in the recent debt ceiling negotiations.

One can decry the brinksmanship that we saw during the debt ceiling debate, and I do, but at least something was done. Which is more than I can say for an average day on Capitol Hill.