Returning to a battle begun a couple weeks ago, two Democratic Senators firmly in the “fiscal scold” caucus are holding hostage the legislative action raising the national debt ceiling until they get a special workaround to cut future US budgets.

Two Democratic senators said Tuesday they wouldn’t vote to support an increase in the nation’s debt ceiling without corresponding action to address the country’s long term fiscal imbalances.

Sens. Dianne Feinstein (D., Calif.) and Evan Bayh (D., Ind.) told a hearing of the Senate Budget Committee they would vote against a needed increase in the limit the federal government can borrow unless Congress creates a commission to come up with proposals to bring the deficit and debt under control.

The federal government’s debt is fast approaching its legally binding ceiling of $12.1 trillion. Treasury officials have warned that Congress will have to increase that limit likely by mid-December.

If Congress doesn’t act to increase the debt ceiling before the limit is reached, the U.S. would be forced to default on its debt. This could lead to an instant downgrading of country’s prized top shelf credit rating and lead to the government having to pay significantly higher to largely foreign investors to continue buying treasury bonds.

While this scenario is extremely unlikely, it provides significant leverage to those who want to attach related measures to legislation increasing the debt limit.

“There are rare moments of leverage in this institution where you can institute fundamental change,” Bayh said. “This is one of those moments.”

Bayh and Feinstein are among the usual suspects arguing for a fast-track way to reduce expenditures.

My first reaction to this is that there is already a way to circumvent the supermajority process for budget issues. That’s what the reconciliation process is all about, and it has been used multiple times in the past on similar issues. But that’s not good enough for the fiscal scolds. They want Congress to “create a commission.” It sounds benign, but they really want something similar to the Base Realignment and Closure Commission. Congress created this in 1988, seeking to hurdle past parochial concerns from lawmakers which made the closure of job-creating military bases problematic. The BRAC has succeeded in closing over 350 installations since its inception.

The way the BRAC works is that the independent panel takes testimony and comes out with a final recommendation for base closures in a particular year. That recommendation list is sent to the President, who signals his approval and releases it to Congress for their review. Congress can within 45 days propose a resolution of disapproval that would need to be passed in both houses. That vote affects the entire base closure proposal; no amendments can be made, with certain bases coming on or off the list. The vote cannot be filibustered, and so the BRAC proposal is assured an up or down vote in both houses of Congress, and if nothing is done within 45 days, it becomes law automatically.

The fiscal scolds want this process in place, only for the budget. They want a “bipartisan commission,” including members chosen by Congress and the President, to look very specifically at cuts to the federal budget:

It would be tasked with coming up with a comprehensive series of proposals to cut spending and increase revenues, primarily aimed at large entitlment programs such as Medicaid, Medicare and veterans’ benefits.

Congress would then have to vote up or down on the package, with no amendments allowed by lawmakers to make the recommendations more politically palatable.

Notice that tax increases, the other way that you balance a budget, are not considered in this scenario by the budget commission. Theoretically, such a panel could mandate new taxes, but that’s clearly not what’s expected by either Feinstein, Bayh, or Kent Conrad and Judd Gregg, the leaders of the Senate Budget Committee, who are formulating the proposal for the budget commission.

I don’t think it takes a lot of wondering to figure out what’s going on here. The same people who voted for tax cuts for the rich and endless wars costing trillions want to empower an unelected commission to mandate spending cuts and go around Senate rules. Given the unprecedented obstructionism of Senate Republicans, I don’t think anyone would get upset by a process that neutralizes the filibuster. But this is a selectively targeted process, one which also impinges on the power of committees to write laws and eliminates the possibility of amendment, which would surely be constructed to cut programs like Medicare and Medicaid, veterans benefits (!), Social Security and any other benefit program you can imagine, particularly ones that impact voiceless communities like the working poor. This is a grand push for Hooverism, and it comes at the worst possible time, when the recession is disproportionately impacting the poor and working classes, and safety net provisions can actually be a Keynesian stimulus to the economy.

And they are using the debt limit vote, threatening to force the United States into default if they don’t get a quick and easy way to cut people’s disability checks or bare-bones health benefits.