Having avoided another debt ceiling standoff in December, Congress delayed the next vote on paying the nation’s bills past the midterm election. That creates an opening for a campaign about the country’s soaring national debt – and discussion about how to depoliticize the borrowing cap that funds it.
Those looking for any sign of progress on the federal debt were rewarded at the end of the year with this much: After months of threatening a familiar brinkmanship, Republicans in Congress decided not to stand in the way of the most recent legislation required to raise the debt ceiling.
Calling that headway against one of the nation’s most serious challenges borders on the sardonic. It’s cold comfort that half the policymakers in Washington resolved not to compound the problem of record red ink: Reviving the prospect of an unprecedented and cataclysmic default threatened to weaken the Treasury’s credit rating and drive the cost of future borrowing even higher.
Instead of holding the debt limit hostage until almost the final possible hour, as he had done only two months before, Senate Minority Leader Mitch McConnell concluded it was in his party’s best interest to acquiesce this time and permit majority Democrats to carry out a congressional obligation — without meeting any GOP demand, but also without any GOP “yes” votes for the bill.
The result is that the Treasury will be permitted to borrow as necessary for the coming year, to pay bills that have come due because of spending and tax policies enacted in years past by Congresses of both parties at the behest of presidents of both parties. (To emphasize, allowing the legal limit on the Treasury’s borrowing to rise to $31.4 trillion only permits the government to make good on existing obligations. In no way does it generate cash for today’s policymakers to spend on new things.)
That means the next headline-generating if fabricated “battle over the debt”, with its potential for distracting histrionics and partisan brinkmanship, has been postponed until after the 2022 midterm election. And so the GOP’s oft-told falsehood, that their political opponents demand more debt to finance a “spending spree”, has been at least partially neutralized as a campaign issue for the coming election cycle.
That, in theory, is its own sort of progress — because it gives voters a fresh opportunity to insist House and Senate candidates engage in the more genuine struggle to control the red ink. Government debt now exceeds the value of all the goods and services produced by the United States in a year – a problem that puts the nation’s financial stability at risk. That won’t go away unless policymakers in both parties back away from their long-held positions. Democrats need instead to embrace restraint on spending, especially given the rapidly growing costs of Social Security, Medicare, and Medicaid. Republicans need instead to embrace increases in taxes, especially on wealthy individuals and big corporations. And it’s up to voters to press for changes to the partisan dogma.
The next year, and the likely return of split partisan control over Washington after that, could also set the stage for yet another mark of progress. There is already a spark of bipartisan discussion on Capitol Hill about ways to improve the process for increasing the borrowing limit, and those talks would likely intensify if the two parties shared power – and responsibility – for fiscal policy when the debt cap next comes into view, early in 2023. Some want to eliminate the need for lawmakers to vote on the matter, taking away its political potency altogether. Others have ideas for at least reducing the required legislation’s potential as a partisan cudgel. And another group would condition a rise in the debt ceiling on the president proposing and Congress debating a plan for tackling the debt’s root causes.
Formal debate on such proposals, however, would only occur after the coming campaign. The Democrats now in control of the legislative agenda have no interest in reviving talk about the debt. Instead they hope that, because President Joe Biden signed the law raising the ceiling on Dec. 15, almost 47 weeks before Election Day, voters’ limited memories and plenty of more immediately pressing national problems will keep the issue on the back burner through fall.
That’s because, misunderstood or not, the debt looms as a potential political problem mostly for Democratic lawmakers seeking new terms. Three recent polls bear this out: Politico/Morning Consult found 31% of registered voters assign most fault for any potential default on Democrats while just 20% put the onus mainly on Republicans (a plurality 39% would lay blame equally). The Hill/HarrisX found that, forced to make a choice, 54% of registered voters would oppose raising the ceiling. And The Economist/YouGov found 40% of partisan independents opposed to a higher debt ceiling and another 30% unsure if it should be increased – a strong signal that millions of swing voters lack a clear understanding of what the debt limit is or what changing it signifies, and so might be swayed by campaign rhetoric.
The numbers underscore perhaps the best explanation for why McConnell altered course and acceded to the debt increase at the end of the year despite several declarations he would not. If he hopes to wage the midterm campaign largely on traditional Republican ground, focusing his attacks on the “tax-and-spend liberalism” of the other side, pointing to the debt votes and mischaracterizing their meaning may be one of his most saleable options – especially if there’s no further action on the Biden Build Back Better package.
In the end, every Democrat in both the Senate (where the final vote was 50-49) and House (221-209) voted for raising the debt. They were joined by a solitary Republican, the iconoclastic Rep. Adam Kinzinger, who is not seeking re-election in Illinois this fall.
To be sure, the legislation only got that far because McConnell had earlier agreed with Majority Leader Chuck Schumer on a convoluted, one-time-only process permitting this debt limit increase to get through the Senate on a simple majority – not the 60 votes usually required. And getting that procedural maneuver enacted not only required attaching the language to an unrelated and widely popular bill (postponing some scheduled cuts to farm programs and Medicare) but also repelling a GOP filibuster effort. That effort was defeated only because McConnell and 13 other Republicans voted with the Democrats to overcome the hurdle.
When the Debt Became Political
Some sort of parliamentary legerdemain, although not always that complex, has come to characterize the process of raising the debt limit in the last three decades, an era marked by increased political polarization and, more often than not, divided control over Washington.
Laws raising the limit were enacted about six dozen times, with minimal friction, in the eight decades before 1995. But that year, Newt Gingrich became the Republican speaker of the House to disrupt long-standing governing norms. And one of the ways he sought to make good on that pledge was to hold a debt ceiling bill hostage, hoping that would boost GOP leverage in annual budget negotiations with Democratic President Bill Clinton. The debt ceiling has all too frequently been a kind of political football ever since, getting passed around to score political points while putting the country’s financial health at risk.
Clinton got much of the spending he sought only after three partial government shutdowns, when the GOP agreed to a contorted but de facto debt ceiling increase: exempting certain kinds of borrowing from the limit until after the next election.
Other times, the necessary language has been attached to legislation with a more popular purpose, partly to avoid the “Congress approves more red ink” headline and partly to attract lawmakers’ votes with a politically compelling sweetener. During George W. Bush’s presidency, Republican congressional majorities used their annual budget packages as vehicles for debt language, for example, while Democratic majorities early in Barack Obama’s tenure folded a big debt hike into a financial bailout of the mortgage guarantee agencies Freddie Mac and Fannie Mae during the housing crisis.
After what’s widely considered the most intense debt standoff yet – in 2011, Obama and a cadre of combative small-government Republicans newly in control of Congress reached a deal just two days ahead of an anticipated default – GOP leaders invented a new, but less attention-grabbing methodology for permitting more borrowing, wherein no dollar amount would be mentioned as the new cap. Instead, the debt ceiling would be “suspended” for a specified period, allowing the Treasury to sell bonds as necessary to pay the government’s bills during that time, at the end of which the debt limit would be reset as the government’s accumulated debt on that day.
Two laws of this kind were enacted in the remaining Obama years and four more when Donald Trump was president, permitting the debt to grow from $17 trillion to $28.4 trillion – the total when the most recent “suspension” came to an end in August and the fall’s tensions between Biden and the congressional GOP on this issue began.
Most times, these suspensions won bipartisan support. Even solid majorities of Republicans in both the Senate and House, for example, voted for the first suspension under Trump, which he arranged to have paired with a $15 billion disaster relief package in 2017.
Deflating the Political Football
As a practical matter, the United States is unique in requiring the legislature to adjust the government’s borrowing limit. (The Danish Parliament also has this responsibility but has created a debt ceiling so high it probably won’t ever be reached.) Every other nation’s treasury has authority to pay debts as they occur, but Congress decided that it wanted an affirmative role in 1917, when it came time to finance the American entry into World War I.
The showdowns over the last several decades have given Congress some small incentive to consider options for avoiding, or at least limiting, such confrontations in the future.
End the Game Altogether
There is nothing legal or constitutional preventing a president and likeminded Congress from agreeing to effectively repeal the century-old congressional approval requirement, and thereby eliminate the debt limit as a potential political football. But legislation to that effect, giving the Treasury unilateral authority to borrow as necessary, has been introduced for the past six years and has never advanced. The latest version got a small burst of attention in the fall, however, when the top two Democrats in the House, Speaker Nancy Pelosi and Majority Leader Steny Hoyer, spoke approvingly of the bill and Treasury Secretary Janet Yellen called for the statutory debt ceiling to be abolished, saying its potential deployment as a political weapon posed “destructive” risk to the U.S. economy.
At the moment, this de facto elimination of the debt ceiling has only Democratic support at the Capitol, and GOP cooperation would be required to alter the current system. That’s why there’s renewed interest in an alternative that’s enjoyed support from Republicans in the past: empowering the executive branch to take the lead in hiking the debt limit, but giving Congress the opportunity to block the move.
Lead and Block
Such a system was applied to a quartet of debt limit increases in 2011-13, and with the backing of McConnell and most other GOP congressional leaders – precedent that could give the procedure some momentum now. When the president announced the Treasury was close to needing to borrow above the ceiling, Congress had the ability to block him with legislation – although if such a bill had passed it could (and surely would) have been vetoed and then would have had to muster the difficult two-thirds majority in the House and Senate for enactment anyway.
This approach, however, may not be optimal. When the system was used in the 2010s, the Republican-majority House approved two such resolutions of disapproval but both were scuttled in the Democratic-majority Senate. These votes nonetheless offered lawmakers a sort of legislative free pass: They could go on record “against more debt” without any real fear of prompting a default.
Borrow and Trim
The freshest idea, unveiled in December during negotiations on the most recent increase, would go a substantial step farther and compel Congress to at least consider a plan for trimming the national debt every time there was a rise in the borrowing limit. As a result, it has already won a potentially significant endorsement from the Bipartisan Policy Center, an influential Washington think tank that has federal fiscal responsibility high on its list of interests.
Under the legislation, introduced in the House by Republican Jodey Arrington of Texas and Democrat Scott Peters of California, the president could suspend the debt limit one year at a time, unless Congress within 30 days voted by veto-proof majorities to block it. But also, as a condition of suspending the debt ceiling, the president would have to send a plan to Capitol Hill for reducing the debt significantly – by 10 percentage points, as compared to the gross domestic product, within a decade. (Total public debt was 122% the size of the economy last fall, the Federal Reserve estimates, a debt-to-GDP ratio not seen since the end of World War II.)
The House and Senate Budget committees would then have two months to come up with their own alternative plans of similar scope. If they missed the deadline, the president’s proposal would be put to a vote on each side of the Capitol – although it would have to overcome a 60-vote filibuster threshold to pass the Senate. So, while the plan would compel a regular substantive discussion about what to do with the red ink, it would not guarantee progress toward better federal fiscal management.
Still, the bill “would ensure the debt limit never threatens our economy again, and at the same time, would provide an opportunity for substantive legislative debate over proposals to restore fiscal responsibility”, Bill Hoagland, a veteran Republican congressional budget policy aide who’s now senior vice president of BPC, said in announcing the group’s support.
Taking the air out of this political football in this manner would, especially in these divided times, be a substantial step forward.
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