Debt Limit Conversation Swamping Fiscal Slope Debate
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The high-stakes battle over the fiscal slope has detoured into a high-stakes battle over the government’s debt limit. Seeing little hope of forestalling rises top-level tax rates, Republicans have discussed a plan to relent on that and then move directly to a debt limit showdown, where they have the advantage because of the need to have Congress act affirmatively to hike that borrowing capacity.
The President has gathered business leaders to press the case that the debt limit must be extended, and he has said he will simply not negotiate over it. However, the White House did give up significant leverage on this question yesterday, with spokesman Jay Carney saying that the President will not use the 14th Amendment’s language about how the validity of the public debt “shall not be questioned” to essentially supersede the debt limit. Carney said the President does not believe he has the power under the 14th Amendment to ignore the debt limit.
The White House prefers the option of effectively neutering the debt limit, by making it an executive branch request that Congress can only disapprove, subject to veto by the President. This turns the debt limit vote from a simple majority to raise it into an effective 2/3 majority to stop raising it. Mitch McConnell, obviously thinking that Congress would never willingly constrain its own power, put legislation like that on the floor of the Senate yesterday, until he realized Senate Democrats were totally willing to do that, leading him to filibuster his own bill.
There are actually other theories beyond the 14th Amendment at the President’s disposal to ignore the debt limit, including the minting of a $1 trillion platinum coin, under the authority of the Treasury Department. But it looks clear from the Administration’s stance, having consulted their legal advisors at the Office of Legal Counsel, that they won’t reach for something this novel.
A more likely course, if the White House refuses to negotiate, is that they would just start shutting down large sectors of the government and only keeping open what can be paid for out of existing funds. This would cause a massive disruption, but could play out like the government shutdown of 1995-96, especially if Republicans got blamed for the closures of national parks and inability to get passports processed and all the hundreds of thousands if not millions of furloughs.
The problem here actually goes back to last year’s debt limit showdown. This opened a Pandora’s box, telling Republicans in this case that they can take this vote hostage and find a receptive audience in the White House willing to negotiate with them. The President at the time wanted a debt limit showdown as a forcing event to get a grand bargain. He claims that circumstances have changed and that he won’t negotiate this time around. But the problem here is that Republicans learned from the debt limit fight that they can wield this normally routine vote as a weapon. It’s critical to nip that in the bud before it becomes routine practice, before it’s too late.
The other possibility here is that we’re seeing a sequenced grand bargain. The President and House Speaker John Boehner are meeting alone today. The private talks have resumed at all levels. It’s plausible that the parties are orchestrating some kind of two-step. “Exasperated” Republicans first pass the bill extending tax cuts on the first $250,000 of income, letting the rates go up on the top 2%. Then they use the debt limit leverage to get a second deal, with spending cuts and slashes to the safety net. Democrats will say that they lost their leverage and had to give in the second time around. But the whole thing may have been planned from the start.
Provided that Boehner can keep his job, this may just work. But in public, anyway, the talk is of no negotiation whatsoever on the debt limit. We’ll have to see how that holds.
Photo in the public domain.