Who Is the Biggest Loser in the Budget Deal? President Hillary Clinton

Updated:
Posted in: Politics

The all but unanimous consensus among political observers is that Hillary Clinton has been on a roll for the past month or so, culminating as October ended in her “best week yet.” This accepted narrative is obviously correct. Clinton’s most worrisome potential rival (Vice President Biden) decided not to challenge her for the Democratic presidential nomination. She not only dominated the first Democratic presidential quasi-debate, but her closest competitor, Senator Bernie Sanders, effectively ended the political salience of the overblown story about Clinton’s use of a private email server while she was Secretary of State.

Better still, Clinton’s Republican tormenters in Congress made clear that their obsession with the attack in Benghazi in 2012 has been a pure political hit-job. First, never-to-be-Speaker Kevin McCarthy bragged that dragging out the Benghazi investigations had harmed Clinton’s poll numbers. Not to be outdone, the Republicans on the Select Committee on Benghazi grilled Clinton over the course of eleven hours on October 22, accomplishing nothing except finally to prove to nearly everyone that they were simply looking to score political points against their hated enemy.

Overall, Hillary Clinton’s presidential prospects are looking better than ever. If she does become president, however, President Obama and congressional Republicans have essentially guaranteed that she will have a terrible first year in office. The recent, much-ballyhooed budget deal might have been “a victory for Obama,” and it might have made departing House Speaker John Boehner look statesmanlike by allowing him to “clean out the barn a bit” for his successor. The deal itself, however, is a time bomb that will force the next president—if he or she is a Democrat—right back into the trenches of the budget wars.

The Budget Deal, and the Dealing That Led To It

The new budget deal, which President Obama has now signed into law, is in certain undeniable ways an impressive achievement. In particular, the president and congressional leaders accomplished three crucial goals:

(1) The debt ceiling will once again be suspended, just in time to prevent a first-ever default on federal obligations, which would have happened as early as today in the absence of a deal.

(2) The government will continue to operate even after the continuing resolution that averted an October 1 shutdown ends on December 11. Indeed, not only does the bill set spending levels through the end of the current fiscal year (which ends on September 30, 2016), but for all of the 2017 fiscal year as well. Although specific appropriations bills must still be passed, raising the hypothetical prospect of extreme conservatives attempting to derail the process, there is now essentially no chance that the budget process will become politically explosive before 2017. The government, therefore, will not shut down again before October 1, 2017.

(3) The hated “sequestration” spending limits have finally been breached. These were the legacy of President Obama’s ill-fated agreement during the first debt-ceiling crisis in 2011 to negotiate with Republicans to increase the debt ceiling, which was finally accomplished only by adopting a convoluted process that ultimately created arbitrary across-the-board cuts for both domestic and military discretionary spending.

All of which sounds very good. Moreover, although the president did agree to some small-bore spending cuts, overall spending will go up by about $80 billion over two years (an increase that is, admittedly, only about one percent each year above current levels), and most of those specific cuts were good policy on their own merits. To be clear, overall federal spending in the United States needs to increase significantly, especially on infrastructure and education, but it is not necessarily a bad thing that this budget deal did find some spending that needed to be cut. As a bonus, the bill also prevented a needless crisis in the Social Security Disability Insurance system.

Even so, there are reasonable concerns about how all of this happened. One of the lessons from the 2011 fiasco, to which the White House has strictly adhered ever since, is that the president will never again negotiate to increase the debt ceiling. Here, it looks very much like he negotiated some Republican-friendly spending cuts and thus arguably violated his policy of not negotiating with hostage-takers.

Those concerns, however, are ultimately not all that important. First, these were negotiations over spending and taxes, not just the debt ceiling. Although a president should never agree to reopen an already passed budget upon threat of a debt-ceiling crisis, it is completely appropriate for any president to include the debt ceiling as part of negotiations over a budget that has not yet been passed. As I will describe below, President Obama did get the timing wrong in a potentially disastrous way, which is part of the trap that awaits would-be President Clinton. As a strategic matter, however, there is nothing wrong with including a debt ceiling adjustment in a package that necessarily requires the debt ceiling to be adjusted anyway. Indeed, that is exactly the right way to negotiate these matters.

Moreover, any loss of credibility in terms of debt ceiling strategizing that the Obama team might have suffered is harmless. They are out the door only a little more than a year from now, and this long-term deal guarantees that they will never have to go through the budgeting morass again. Even if this White House had been exposed as spineless—and I emphasize that I do not think that they were—this team’s reputation for blinking (or not) during a stare-down means nothing to Obama’s successor.

The Failure to Fix the Debt Ceiling Once and for All

Now for the bad news. The new suspension of the debt ceiling ends on March 15, 2017, less than two months into the next president’s term. At that point, the debt ceiling will be reset at the amount of debt that has accumulated in the meantime, as a result of of duly enacted taxing and spending laws.

This is the third time that the debt ceiling has been suspended in less than three years. In fact, between February 2013 and March 2017, the country will have lived without a debt ceiling for roughly two-thirds of that time (thirty-three out of forty-nine months). If nothing else, this certainly demonstrates that the debt ceiling is unnecessary, given that the nation’s debt did not “rise without limit,” as Senate Majority Leader Mitch McConnell once claimed would be the inevitable result of getting rid of the debt ceiling.

Even so, Republicans could not bring themselves simply to admit that debt rises or falls on the basis of Congress’s decisions about how much to tax and spend, not because of the debt ceiling. As frequent readers of Justia’s Verdict know, Professor Michael Dorf and I have been arguing ever since 2011 that the debt ceiling is not only unnecessary but unconstitutional.

The problem with the debt ceiling is that it can force the president into a “trilemma.” For example, if Congress obligates the nation to pay $100 in spending but only collect $80 in taxes, the president must borrow $20 to make up the difference. If there were only $5 of borrowing remaining under the debt ceiling, however, the president would appear to be $15 short of the amount necessary to prevent default. The president would then have to choose between violating the tax laws, the spending laws, or the debt ceiling law.

This column is not the place to go back over the constitutional analysis, because my focus here is only on the fact that the newly passed budget deal guarantees that the next president will face a trilemma. We now know with complete certainty that the nation’s bills that will have to be paid after March 15, 2017, will exceed incoming tax revenues, requiring additional borrowing. But at that point—and by design—there would be zero dollars remaining under the debt ceiling. We do not know how long the now-notorious “extraordinary measures” can forestall the next drop-dead date, but it is highly likely that the next crisis will arise before that fiscal year ends on September 30.

This means that, before the 2017 fiscal year ends and while Congress should be working on a set of appropriations bills for fiscal 2018, the next president will have to tell Congress that she or he is facing a trilemma, and that the debt ceiling must be increased. Even leaving aside the nasty little fact that the current deal allows sequestration limits to return after fiscal year 2017, which will certainly further complicate negotiations necessary to prevent a shutdown on October 1 of that year, it is now hard-wired into the law that the next president will be faced with the politically tricky problem of getting Congress to agree again to increase (or suspend, or repeal) the debt ceiling.

Why Is This Only a Problem for Hillary Clinton?

My analysis to this point has described the mismatch between the reinstatement of the debt ceiling in March 2017 and the end of the budget deal more than six months later. Would that not be a problem for anyone who becomes the next president, not just the former Secretary of State? While that is true as a technical matter, in reality it is a concern only for a Democratic president. And at this point, because of her very good month, I am willing to hypothesize that “Democratic president in 2017” effectively means Hillary Clinton.

But why would this not be a problem for a Republican president? The simple answer is that virtually no one foresees any scenario in which the Democrats retake control of the House of Representatives in 2017. And even if they did, the Democrats simply do not have people serving in Congress who would be willing to act in the illogical and reckless way that Republicans have recently acted with respect to the debt ceiling. That is not to say that a Democratic Congress would not devise political strategies to foil a Republican president, but it is unlikely in the extreme that Democrats would engage in the particular insanity of refusing to increase the debt ceiling (or even threatening to do so).

By contrast, it now appears to be very likely that a new President Clinton will find herself in the same position in which President Obama found himself from January 2011 through January 2015, with a Democratic majority in the Senate but a Republican majority in the gerrymandered House. Moreover, any win by Hillary Clinton would surely follow an especially nasty general election, with the most extreme elements of the Republican base more alienated and angry than ever after another bitter defeat. Their champions in Congress—including failed presidential candidates like Ted Cruz and Rand Paul, in league with faux-moderate Speaker Paul Ryan—will surely do everything they can to make their longtime bogeywoman rue the day she decided to run for president.

In other words, although it is true that this budget deal should “end nearly five years of pitched battles between congressional Republicans and the Obama administration over fiscal policy,” we need to remember that President Obama now has less than fifteen months remaining in his term. When he is gone, we will be right back to square one, with an unconstitutional debt ceiling law and a group of Republicans in Congress who are willing to use it for political ends, no matter the economic consequences.

In short, outgoing Speaker John Boehner might be patting himself on the back for shoveling some of the proverbial manure out of the barn, but no one seems to have noticed that he (with the agreement of the soon-to-be-former president) has also made sure that the manure will fall on President Hillary Rodham Clinton.

  • David Howell

    To much of the Budget crisis is self inflicting, From Both parties greater share goes to the Republican, Pushing Trade, Tax cut , Tax Reform and loopholes,At a lost of a trillion dollar per year . From payroll tax revenue from lost jobs. from NAFTA.alone.. And without even looking at the debt and deficit sold to China.The use of the credit card and the deregulation of the markets..That has let out to much deficit spending , To be invested oversea, Than block profit of Taxes , With loopholes and Tax – inversion.. Any one can see were the problem is, And the lost of balances . From what was given to Corp, capital investment for overseas. And what is been paid back, And the working class on the hook paying for it..