House Republicans’ Deep Cynicism: Pay the Rich and Play Politics With Everyone Else

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Posted in: Politics

Congress is back in session, if only briefly, and the Republicans are eager to fight the budget wars again. Their immediate task is simply to pass the spending bills needed to prevent another government shutdown. With only twelve days of scheduled sessions before the end of the fiscal year on September 30, it seems likely that the Republican leaders in both houses will end up passing some sort of temporary financing measures to forestall the possibility of a shutdown for a few weeks or months.

Even that compromise could become impossible if the Republican rank and file decide that they want to hold the entire budget hostage, in an attempt to gut funding for Planned Parenthood. Worse than that, however, Republicans are now gearing up for yet another trip to the brink of a first-ever U.S. government default. Once again, Republicans are threatening to refuse to increase the debt ceiling unless Democrats do their bidding. Who cares that this Republican-led Congress has already approved legislation that cannot be carried out without increasing overall federal borrowing? Somehow, Republicans want everyone to believe that it is the Democrats who “want” more debt.

If all of this sounds depressingly familiar, you are not imagining things. After an initial political victory over President Obama in the summer of 2011, Republicans have been on an epic losing streak when it comes to debt ceiling brinkmanship. This time around, however, they apparently think that they can win the political debate with two oh-so-clever moves: redefining what it means to default, and keeping Social Security off the chopping block. Both moves are cynical and dishonest. They also make no sense, even on their own terms.

Priorities? We Don’t Care About Our Stinkin’ Priorities!

When Congress passes spending and taxing bills, those laws reflect the negotiated compromises that become the nation’s fiscal priorities. Legislators who favor spending on farm programs, for example, negotiate with those who favor spending on public schools, and with others who want to increase defense spending, and with still others who are trying to prevent malnutrition and starvation among poor children. When the bills become law, the president is required to do what Congress has ordered him to do—that is, he must faithfully do everything that Congress has ordered him to do. He will do so by collecting the taxes that Congress orders him to collect, and if there is not enough money coming in from taxes, the president must borrow exactly as much money as Congress’s legislated priorities require.

Congressional Republicans, however, are again threatening to put President Obama in an impossible position. At some point, most likely in late November or early December, the president will not be able to pay all of the nation’s bills without borrowing more money than the unchanged debt limit purports to allow. Although Professor Michael Dorf and I have shown that the president would be constitutionally required in such circumstances to issue debt beyond the statutory limit (see, for example, this Verdict column from early 2013), Republicans have insisted that he would instead be forced to refuse to make legally required payments, in full and on time, when they come due.

This strategy, however, has created a problem for Republicans. Among the obligations that the government must pay on any given day are the interest payments on the government’s outstanding debt. If we were to default on those payments, the full faith and credit of the United States would mean nothing. And we would all pay a dear price.

The Republicans’ initial response to this problem was to say that the president would be required to “prioritize” interest payments on debt, above all other spending priorities. Thus, Republicans claimed that the president would be at fault if he paid any other federal obligation ahead of interest payments.

This strategy has several problems. First, it purports to supersede the priorities that Congress itself has already set in law, saying essentially, “You know when we passed those laws that obligated the government to pay people and businesses, in specific amounts and on specific days? Well, they will all have to wait because bondholders deserve special treatment.”

Back in the spring of 2013, I wrote a Verdict column in which I pointed out that this strategy amounts to a statement by Republicans that we must “pay the rich and foreigners first.” Because most interest payments are owed to domestic banks, to wealthy Americans, and to foreign businesses and governments, Republicans would be saying that the president must ignore the law (that Republicans themselves passed) in order to make whole those favored few.

That, understandably, created an awkward situation for Republicans. Now, however, Republicans think that they have come up with a work-around. It still amounts to prioritizing the wealthy over everyone else, but it is even more cynical than their previous plan.

Preventing Default By Calling It Something Else

This week, the House Ways and Means committee is working on a bill misnamed the “Default Prevention Act.” Rather than simply telling the president to move wealthy and foreign investors to the top of the list, that bill would order the president to borrow more money if necessary to make those lenders whole. Everyone else—veterans, government employees, hospitals that provide Medicare services, businesses that work under contract with the government, and so on—would be left to the vagaries of the government’s revenue flows. At some point, unless the debt ceiling were increased, the government would not be able to meet its obligations to all of those people and businesses.

House Republicans are so excited about their new approach that they have created a webpage providing answers to questions that they anticipate in response to this bill. For example, because the bill explicitly authorizes the president to borrow additional money, even if the government has already reached the debt limit, one might reasonably ask: “Is this essentially another way of raising the debt limit?”

Good question. The Republicans confidently answer, “No,” and they explain that their proposal “requires Treasury to roll over principal and interest payments by issuing debt outside the limit.” So, issuing debt “outside the limit” is apparently acceptable, because the arbitrary debt ceiling has not been increased? This is the oldest game in town, simply calling something “not debt” in order to claim that debt has not been increased. Republicans pulled a similar move during George W. Bush’s administration by insisting on classifying spending on the wars in Iraq and Afghanistan “off budget.” That is, we spent the money, but we did not list it on the budget. Now, they would have us borrow money but not call it debt. And they call themselves the party of fiscal responsibility?

In fact, the broader idea of prioritizing spending is yet another example of this meaningless relabeling. The Republicans Q&A page—which carries the catchy title “Default? Not on our watch.”—simply asserts that the only thing that counts as a default is not to pay a bondholder. As they put it: “Missing a debt payment, or defaulting, would warrant a credit rating review, weaken the economy, and tarnish our economic standing in the world. This is an unacceptable outcome.”

Indeed, that would be unacceptable, and it could be easily avoided if Republicans would authorize the amount of borrowing necessary to meet all of the government’s obligations. But the beginning of their answer, “Missing a debt payment, or defaulting,” makes it appear that any other default is somehow not a default. A recipient of veterans’ benefits, for example, could apparently be told, “Sorry, we don’t have the money to pay you on time. We sure hope you didn’t have anything important that you needed to buy. And don’t worry. Even though we’re not paying you as we promised, Republicans in Congress are happy to tell you that this is not a default.” Democrats on the Ways & Means Committee correctly responded: “Experts agree: Prioritization is ‘default by another name.’”

Refusing to use the word default would obviously be cold comfort for the people and businesses that would be stiffed. Beyond that, however, the very concern that the Republicans’ webpage raises—a default causing “a credit rating review, weaken[ing] the economy, and tarnish[ing] our economic standing in the world”—would also happen were we to commit default by some other name. Lenders do not only look at whether they are being paid, but they also carefully assess whether borrowers are defaulting on any other obligations. Although holders of the government’s debt would surely be relieved to know that they are currently at the top of the queue, the idea that financial markets would not question our overall creditworthiness (and would not wonder how long they will be protected from such nonsense) is fanciful. Such an unprecedented failure to meet our clear legal obligations would most definitely weaken the economy and tarnish this country’s standing in the world.

The Extra Dollop of Political Cynicism: Dragging Social Security Into the Game

As bad as the Default Prevention Act appears to be, the Republicans’ political cynicism goes beyond these word games, and even beyond their puzzling belief that financial markets would not notice that the government was not paying its bills. Even within this very short proposed law, the Republicans cannot keep their story straight.

In addition to requiring the president to borrow more money (but not to call it debt) to pay bondholders, the proposed bill also instructs the president to borrow as much money as is necessary to pay Social Security recipients in full. The Republicans’ webpage explains: “This means the president can continue making all Social Security payments, in the event the debt limit is not raised before it’s reached.”

But if the reason we need to prioritize interest payments on debt is because it would be bad to “default” in the narrow sense that Republicans have tried to redefine that word, why are Social Security recipients also exempt from the cold logic that somehow holds that failing to pay non-debt obligations is “not a default”? If spending obligations for items that are not principal and interest payments on the national debt can be honored only if enough revenue happens to come in on the day the bills come due, why do Social Security recipients get a better deal than, say, veterans or the doctors who provide services under the Children’s Health Insurance Program?

The answer cannot be that we must pay Social Security recipients because they are legally entitled to payment. They are so entitled, but so are all of the other people who hold legally valid claims against the federal government. Again, we are not talking about Congress forcing the government to reduce its future obligations. Republicans are trying to say that the spending that the government already owes is unilaterally renegotiable.

Everyone to whom the government owes money, therefore, is in the same legal position as Social Security recipients. What Republicans are counting on, however, is that all of those other obligees are less politically visible, and that it will somehow escape everyone’s notice that the government is not meeting all of its legal obligations. By putting Social Security recipients under the protection of the bill, in a naked attempt to neutralize potential political blowback, the Republicans throw off their pretense of logical consistency and make it clear that they are willing to meet the obligations of people they like, and those whom they need politically. It is no coincidence that the Republicans’ most vocal base tends to skew older, and therefore that they would feel the brunt of nonpayment of Social Security benefits.

Will such unvarnished cynicism work? In 2005, the Bush Administration tried to neutralize opposition to its push to partially privative Social Security by emphasizing that the new, less generous rules would only apply to younger people. Older Americans were told that their full benefits were safe under the Bush proposal. The ploy, however, did not work. Even though they personally had nothing at stake, older Americans saw through the political maneuvering and overwhelmingly opposed the plan, and it died an ignominious death.

Of course, the Republicans’ game here is not actually to pass this bill. Their purpose is to put on a show, trying to confuse people into thinking that they have figured out a way to stop debt from rising without actually causing a default, and without threatening politically important senior citizens. Cynical ploys often work in politics, but this one is so brazen that it is hard to imagine that the Republicans’ losing streak will end any time soon.

  • James Fredinkle

    Neil, I disagree with your article’s agenda. I, along with a majority of Americans in the last election cycle, applaud Republican efforts to control the deficit and advance practical yet cost-efficient legislation. I think most Americans see through the political ploys of Democrats and look forward to whatever change they can bring to Washington.

  • FPNiemann

    Your such a babling jackass.Thankfully your just a professor.