The Next Debt Ceiling Crisis Can Be Prevented If Democrats Learn From Filibuster Reform

Posted in: Politics

To nearly everyone’s surprise, there will be no need for a last-second deal to avoid another government shutdown on January 15 of next year. The deal that ended the shutdown earlier this Fall had set a December 13 deadline for the House and Senate to come up with an agreement on the budget, but there was no reason to expect success, and every reason to imagine that we would be facing another shutdown in the new year.

As it happened, however, the chairs of the budget committees in the Senate and the House did agree on a deal, and the resulting law will prevent a replay of the absurd standoff that resulted in the government’s shutting down for the first half of October. The government will be funded beyond January 15, and the next possible shutdown will come no earlier than October 1, 2015, which is the end of the 2015 fiscal year. (Technically, the government will not be funded unless the appropriations bills that together determine “government spending” are passed by January 15. With the current agreement now passed by both houses of Congress, however, the expectation is that those bills will be passed without much trouble.)

The content of the new budget agreement is mostly remarkable for its blithe acceptance and continuation of the harsh austerity that the United States political system has enforced for the last several years. The hard right faction of the Republican Party achieved about 95 percent of its budgetary goals, with Democrats considering it a victory to merely restore a tiny amount of the spending that had been hacked away by the sequestration cuts and other austerity measures with which they had collaborated since 2011.

Democrats also decided not to press their current political advantage in order to gain an extension of benefits for the long-term unemployed, leaving that difficult fight for another day (and leaving those vulnerable people facing a very unpleasant new year). Even so, it is hardly surprising that the most extreme Republicans have cried foul, and politicians and the press have hailed this agreement as somehow a “middle ground” that could represent a return to a functioning political system.

For example, a headline in The New York Times described the budget deal as “a reprieve from Washington paralysis.” And Senate Majority Leader Harry Reid offered the hope that the “legislation should help break a terrible cycle of governing by crisis.”

What all of these hopeful comments willfully ignore, of course, is the much greater danger posed by the next debt-ceiling deadline. Although a few news reports have commented in passing on the failure to address the debt ceiling in this bill, the general mood of relief has allowed virtually everyone to ignore the question of whether the Republicans will continue to hold the country, and indeed, the world, hostage to their demands, by refusing to increase the debt ceiling without extracting concessions from the Democrats.

Anyone who was hoping that there might be a new world of sane budget negotiations must, unfortunately, now return to the sad reality. There is, in fact, every reason to believe that there will be a major debt-ceiling crisis in 2014. The good news, however, is that there is now also a clear political path by which the Democrats could neutralize that threat. The Constitution is on their side, and their recent experience with the fight over the Senate’s filibuster rules should give Democrats the confidence they need to move forward.

The Republicans Quickly Disabuse the World of the Idea That They Have Come to Their Senses

The current status of the debt-ceiling statute is a bit odd. As part of the agreement to reopen the government in October, and to avoid imminent default on the government’s obligations, Congress passed a provision that suspended the debt ceiling until February 7 of next year. As they did earlier in 2013, Republicans agreed not to increase the debt ceiling explicitly, but rather to put it to sleep for several months, only to revive it at a higher level several months down the road, with the statutory maximum reset at the higher level that the actual debt will have reached by that date. In the political theater on the right, that is somehow not a vote to increase the debt ceiling.

When the debt ceiling regains consciousness next February, the Treasury Department will again be forced to engage in “extraordinary measures” to prevent a default on U.S. obligations. That is, given that the spending to which Congress has committed the government under the new budget will exceed tax revenues, Treasury would normally need to borrow the difference. With the debt ceiling purportedly preventing that from happening, however, Treasury will instead engage in various accounting maneuvers and asset sales to cover the difference.

Those extraordinary measures will most likely be exhausted in March, although we might be able once again to limp along for several more months. (The debt ceiling was reawakened in May of 2013, and Treasury’s actions extended the drop-dead date to October 17.) At that point, the U.S. will face possible default on its obligations.

When the new budget agreement was announced last week, it was unclear whether the silence about the debt ceiling meant that the Republicans had decided to stop using that law to extract policy concessions from Democrats. It at least seemed remotely possible that the Republicans had seen the light, and that they would do what Congresses had always done before 2011, adjusting the debt ceiling as necessary to accommodate the commitments to which Congress had bound the United States government.

That fantasy, however, did not last long. Within days, Rep. Paul Ryan was reading (rather ungrammatically) from the standard Republican playbook, saying: “We don’t want nothing out of this debt limit. We’re going to decide what it is we’re going to accomplish out of this debt limit fight.”

Similarly, Senate Minority Leader Mitch McConnell said: “I doubt if the House or, for that matter, the Senate is willing to give the president a clean debt ceiling increase,” adding that legislation to increase the debt ceiling “gets the President’s attention,” allowing Republicans to try to extract something from him.

We are, therefore, exactly where we have been for the past three years. Republicans think that increasing the debt ceiling is somehow a favor that they are free to grant or withhold from the President, depending on what he gives them in return. They thus think of increases in the debt ceiling as something that the President “wants,” in the same way that he wants to achieve his various substantive policy goals.

The reality, however, remains that increasing the debt ceiling is not a concession to the President. It is a “favor,” if one insists upon viewing it that way, to the American people and the global economy. Failing to move the debt ceiling to the level that is necessary to accommodate Congress’s budgetary decisions, after all, potentially puts the country at risk of defaulting on its obligations. The consequences of that terrifying outcome would include spiking interest rates, disrupted financial markets, and even economic depression.

The Return of the Trilemma: The President Will Once Again Need to Confront the Republicans’ Hostage-Taking Strategy

The Republicans, again, are continuing to say that they view increases in the debt ceiling as political bargaining chips. Give us something that we want, they say, or “yer economy’s gonna get it.” They act as if the President would be required to obey the debt ceiling, even if doing so would lead to default.

That, however, has never been true. During the earlier iterations of this debt-ceiling craziness, Professor and fellow Justia’s Verdict columnist Michael Dorf and I analyzed what the President must do under the Constitution, if Congress puts him into an impossible situation. We have made our arguments in scholarly form, but we also summarized our argument in a Verdict column earlier this year.

The basic problem with Republicans’ potential refusal to increase the debt ceiling is that the President would be confronted with a logical impossibility: (1) pay in full all of the people to whom Congress has appropriated funds, (2) collect no more in revenues than Congress has authorized, but (3) do so without borrowing any more money. Because Congress has already committed the government to pay obligations that exceed projected revenues, we know for sure that the President will have to violate at least one law: the appropriations law, the tax law, or the debt-ceiling law.

The Buchanan-Dorf analysis to which I referred above shows that the Constitution’s separation of powers would be best preserved and protected by having the President meet all of the country’s financial obligations, in full and on time, even if doing so would require him to undertake more borrowing than the debt ceiling purports to permit.

Importantly, our conclusion is not that the President can “just spend as much as he wants to,” as some people have claimed in mischaracterizing our point. It is, instead, that the President, under the separation of powers enshrined in the Constitution, has no business engaging in the kind of legislative decision-making that would be involved in deciding which obligations can be ignored. Congress made those commitments in the first place, and it is Congress that must change them, if it wishes to alter the amount of debt that the government takes on.

The New Reality: Objections to the Buchanan-Dorf Approach Are Now Even Less Convincing Than They Used To Be

There has, to date, been no attempt by any legal scholar—or anyone else, for that matter—to disprove the Buchanan-Dorf analysis. Instead, the basic response has been that our analysis is “unrealistic,” because the President would not dare try to “blow through the debt ceiling,” and besides, real-world financial markets would not be willing to deal in the new debt that the President would issue.

On the question of politics, the concern has always been that the Republicans would make political hay out of the idea that the President has defied Congress by ignoring the debt ceiling. There has even been talk of impeachment, should the President follow our advice.

It has been obvious all along, however, that the President would be open to impeachment no matter which path he might choose. He will, after all, have defied Congress’s orders about something. If he defaults on an existing obligation to which Congress has committed the nation, then the obligee can certainly sue the President for breach of contract, and Republicans can decide to impeach the President for ignoring its appropriations laws.

The only serious response to the idea that the President would face an “impeachment trap,” as I have described it, has been that the political risks of issuing additional debt are worse for the President and his party than defaulting on our obligations would be. If he presides over a default, the argument goes, the President can “win the politics” by saying that he had no choice. (This argument further requires one to believe that the President can convince the public that he had no choice but to default, when in fact he would have had the choice to issue additional debt, but let us set that rather important objection aside for the moment.)

The political objection, in its essential form, simply boils down to saying that it is imprudent to take such a big risk. The President would not, under this view, be able to convince the public that issuing sufficient additional debt to avoid default was better than defaulting. It is, in short, just too risky.

This is, in fact, exactly the objection that was raised to Senate Democrats’ efforts to change their chamber’s filibuster rules. Yes, opponents admitted, you are on solid legal ground, but it will just cause too much trouble to be worth the risk. Republicans will raise holy Hell, and the public will believe them.

Ultimately, the Democrats concluded that the continuing damage to the country was too much, because Republicans were abusing the filibuster. And after initial howls from Republicans, the supposedly earth-shattering event has come and gone without serious repercussions. The Republicans quickly gave up their retaliatory slowdown tactics, and life will go on.

If Republicans again try to use the debt ceiling to extort concessions from Democrats in 2014, the Democrats should surely be able to see that the situation is at least as dire as the circumstances that led them to change the filibuster rules. If Republicans’ unprecedented levels of blocking judicial and executive nominees were problematic enough to take a supposedly huge political risk, surely the specter of unending debt-ceiling standoffs should be enough to make the Democrats finally say, “Enough is enough!”

Now Is the Time To Announce That Things Will Be Different

As it happens, the Democrats have a way to reduce the political risk. As I argued in a Verdict column two months ago, the President should make a clear, simple announcement: “I hereby vow that I will never allow the United States to default on its obligations.”

He could then have his Treasury Secretary explain what that means: Rather than again staring down the Republicans, hoping that they will blink before we actually go over the brink into a cataclysmic default, the Administration will now put in place plans to issue debt as needed to prevent default, should the Republicans ever make that necessary.

Will this lead to screaming and the gnashing of teeth? Absolutely. But the advantage of making this announcement well in advance is that it will allow the arguments to be played out long before the drop-dead date on the debt ceiling is reached. During that time, moreover, the financial markets can determine the risks of the potential new bonds, and politicians will then see the costs of failing to increase the debt ceiling.

Again, this is not a risk-free path. But neither was the Democrats’ change to the filibuster rules. At some point, however, the prospect of more of the same simply becomes untenable.

With the threat of government shutdowns off the table for almost two years, the President is in an especially good position now to end the madness of recurring debt-ceiling showdowns. The first-best choice would be for Republicans finally to understand that the debt ceiling should not be used for partisan purposes. If they continue to refuse to see the light, however, then the President must show them that he will no longer allow them to use the threat of economic crises to achieve victories that they have failed to secure at the ballot box.