A modest debt limit strategy

A modest debt limit strategy

I agree with Speaker Boehner (in this excellent interview in today’s WSJ) that spending cutters’ principal legislative leverage comes from the March sequester and continuing resolution deadlines rather than from the upcoming need for a legislative debt limit increase. I disagree with those who argue that Congressional Republicans must therefore simply pass a clean debt limit increase as the President requests. I’d like to present an alternate debt limit strategy, one which is both responsible policy and potentially effective in making modest progress in cutting government spending.

My substantive view is that the debt limit must be legislatively increased. It is highly irresponsible to pursue a legislative strategy that places the full faith and credit of the U.S. government at risk. Failing to pay debt obligations is at least an order of magnitude more damaging than a “government shutdown” induced by failing to extend a continuing resolution. Having lived through the 1995 government shutdown, I wouldn’t want to wish that on anyone, but I’d happily risk another shutdown rather than roll the dice on the debt limit.

At the same time, despite President Obama’s jaw-dropping argument to the contrary, we have a government spending problem that must be addressed. If your teenager breaks the borrowing limit on a credit card you gave him, you don’t fix the problem by refusing to pay the bill. But you also don’t let him keep spending at such an irresponsible rate. You pay the prior obligations and you simultaneously force him to change his spending habits.

President Obama and his team are working overtime to frame a “clean” debt limit extension, without any accompanying spending cuts, as the responsible policy path. That is an outrageous argument. Look to Europe: Germany and its northern European neighbors repeatedly loan Greece enough cash to make it through the next few quarters and they require policy reforms as a condition of that loan. They then repeat the process frequently. Sure, Greece would like a large long-term loan with no conditions, but their creditors know that path would lead to no reform and ever-increasing debt.

The responsible policy path is to increase the debt limit and to cut government spending. It is not to increase the debt limit, with vague promises about maybe cutting spending in the future, if it is done the right way and only if it is accompanied by even more tax increases.

But if a debt limit must be enacted, if we cannot risk a default, then how can Republican spending cutters exert leverage on a President who doesn’t want to cut spending?

Most observers mistakenly assume that the only way to force the President to change his spending habits is to threaten to block a debt limit increase. But in addition to other, better levers like the impending spending sequester and the expiring continuing resolution, there are smaller levers that can change how a debt limit law is enacted without killing the necessary increase. These levers are not strong enough to force the President to accept a fundamental shift in spending trends, but they can be leveraged to enact significant incremental spending cuts.

There are three key tactical levers.

  1. All Members of Congress hate voting to increase the debt limit. It is one of the most politically painful votes a member can cast.
  2. Traditionally the majority party in each House delivers the bulk of the aye votes for a debt limit increase. The minority party free rides and most vote nay.
  3. When there’s a legislative disagreement over the size and duration of a debt limit increase, the smaller/shorter increase always wins.

It’s hard to overstate how much Members hate voting for a debt limit increase and how entitled House Democrats feel about not having any obligation to do so because they’re in the minority. That is the soft spot we’re going to exploit—catching the President between his policy goals and the political self-interest of his partisan allies, especially in the House.

I’ll propose this alternate strategy in the form of a hypothetical joint public statement by Speaker Boehner and Senate Minority Leader McConnell.  The 50 vote number below can, of course, be dialed up or down.

Hypothetical press statement by Speaker Boehner and Leader McConnell

SIM-SPEAKER BOEHNER: I want to begin by assuring you that we will not allow the government to default on its obligations. The debt limit will be increased. The questions we must resolve are first, whether we will simultaneously cut government spending and second, who will cast the votes for the debt increase.

The President says he wants a clean debt limit increase without any accompanying spending cuts. I am prepared to bring such a bill to the floor and deliver 50 Republican votes for a three-month clean extension. If they wish to avoid spending cuts, the President and Leader Pelosi simply have to deliver the other 168 votes from House Democrats for a short-term clean extension. I will not block such a bill, and will even deliver up to 50 Republican votes needed to put it over the top. But if the President chooses this path, his party will have to deliver the overwhelming majority of the House votes, and he’ll get only a short-term extension. Then we’ll repeat this exercise three months from now and three months after that.

SIM-LEADER MCCONNELL: If the House were to pass such a bill, Senate Republicans would not filibuster it, but they also would not vote for it. It would have to pass the Senate entirely with Democratic votes.

SIM-SPEAKER BOEHNER:  If the President and Democratic leaders want a longer extension than three months, or if they want more than 50 House Republicans and no Senate Republicans to vote aye (so they don’t have to twist as many Democratic arms to cast a very unpopular vote) then we need to cut government spending as well. If we match one dollar of spending cuts for each dollar of debt limit increase, then I’m prepared to deliver the bulk of the needed votes on the Republican side and do an increase that lasts up to a full year. Under this principle bigger spending cuts lead to a longer debt limit extension. Tomorrow the House majority will pass just such a bill, a responsible bill that both increases the debt limit and cuts government spending. We will pay our bills and we will take a significant step toward solving our underlying government spending problem. [Remember, this is all hypothetical.]

We Republicans see ourselves as representing the government’s creditors, the taxpayers who finance government spending. We will make sure the government does not default.  But we’re not going to provide the votes for a long-term credit extension without reforms and regular checkpoints. If the President wants more borrowing without taking responsible action to cut spending, his party will have to deliver most of the votes in the House for such a bill, and they can explain to their constituents why they think we should keep borrowing without solving the underlying fiscal problem. And they can do this every three months for the foreseeable future.

In the House we’d be willing to increase the debt limit for longer than a year if it is matched dollar-for-dollar with spending cuts, but only with a verifiable commitment from Senate Majority Leader Reid and Senate Budget Committee Chairman Murray that the Senate will pass a budget resolution this year and next.

Repeating myself, the House will not allow the government to default. Tomorrow the House majority will pass a bill that raises the debt limit and cuts government spending. If the Senate instead raises the debt limit without cutting spending, then I will bring the bill to the House floor and deliver 50 Republican votes for it, as long as it’s not more than a three-month extension.  If the Senate sends us a clean long-term extension, we’ll just send it right back to them.

The President and his party have a choice. They can have clean short-term debt limit increases without spending cuts, passed every three months almost entirely by Congressional Democrats. Or they can have a longer-term debt limit increase simply by cutting government spending and passing budgets in the Senate.

Either way, the President will get his debt limit increase, and the U.S. government will meet its financial obligations. But if he and his party are not going to cut spending, then they will have to carry the responsibility of unrestrained additional borrowing, and they will have to repeat this exercise every few months.  It’s the President and his party’s call.

The above strategy requires significant tactical and message coordination among House Republicans, possibly more than they are currently able to execute. But if they had such coordination they could create modest leverage on the debt limit bill while pursuing responsible policy. They could combine this with far greater leverage from threatening to kill a continuing resolution and to allow the spending sequester to bite.

Rather than threatening enactment of a debt limit increase, this strategy attacks the President’s tactical political weakness. The President wants a debt limit increase, but his Democratic colleagues (especially in the House) expect they won’t have to vote for it. By turning this assumption on its head, this strategy would tell the President, “Hey, if you want your terrible policy, you’re going to have to deliver House Democratic votes for it. Good luck with that.” Either the President accepts and Republicans pound on the “Democratic debt limit increase” message every three months, or he agrees to cut spending. Either way, default risk is eliminated. Republicans will look responsible because they will be acting responsibly, and the markets couldn’t care less about which Members take political heat for casting these unpopular votes.

But the Members care. A lot.

(photo credit: Aaron Smith)

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