10.31.2010 0

Turn the Ship of State Around

  • On: 11/11/2010 09:46:08
  • In: Fiscal Responsibility
  • By Bill Wilson

    To hear some of the post-election spin regarding whether congressional Republicans should support increasing the national debt ceiling beyond $14.294 trillion, one might come to the conclusion that Republicans lost control of Congress in 1996 and not in 2006.

    Why the controversy? On November 3rd, Senate Minority Leader Mitch McConnell in an interview with FOX News’ Brett Baier spoke on increasing the national debt limit, “I think it will not be without some strings attached, if it happens, because they’re going to have to seriously address spending and debt.”

    That got everyone’s attention. In order to “seriously address spending and debt,” Republicans plan to use one of the few leverage points they have: the statutory limit on the national debt. Without the House and/or Senate acting on it, the Treasury would find it more difficult to roll over the debt when it comes due. That’s critical, because as Jason Trennert notes, some $5.2 trillion of debt is coming due in the next three years.

    Nor could the government afford to deficit-spend, because it would be completely barred from issuing treasuries for the additional $3.6 trillion Barack Obama wants to borrow over that time. . In the next three years, if spending is not cut, the Treasury will have to sell a record $8.8 trillion of U.S. debt. We’ve never sold that much. It’s the real reason the Fed has once again fired up the printing press with $600 billion of fresh bond purchases.

    By this time next year, the Federal Reserve will be the number one holder of U.S. debt, a sure signal that we’re printing money to pay our bills. In the next few years, the debt will soar past 100 percent of the Gross Domestic Product. By 2018, if not sooner, our Triple-A credit rating will be downgraded. All of these things will mean higher costs to paying the debt in the future, and a weaker dollar. In the end, the dollar will likely lose its special status as the world’s reserve currency.

    That is, unless Congress reins in the out-of-control spending and turns the Ship of State around. One way to do that is by attaching budget cuts to any increase of the debt limit, which Republicans now indicate they are willing to do.

    The establishment immediately fired a warning shot at Republicans. “The government cannot function unless the debt ceiling is lifted,” chimed in former labor secretary Robert Reich. “Ordinarily, it’s automatic,” he said, adding, “The public is in no mood for a government shutdown.”

    “Republicans can’t afford to freeze the debt ceiling,” opined Mike Franc, Vice President of Governmental Relations at the Heritage Foundation, adding, “They’re too scalded from the last government shutdown.”

    So, according to this conventional wisdom, capping the national debt limit would be akin to the ill-fated government shutdown of 1995, when Republicans attempted to balance the budget and President Bill Clinton vetoed it.

    A lot has changed since then. Back then, Republicans had not been in power for 40 years. They may have suspected, but they could not know for certain what would happen when they presented their budget to Clinton. There was no FOX News back then, nor any 24-hour news cycle. When government operations were shut down, Clinton was by far the more capable communicator, and he managed the slower news cycle to his advantage.

    Today, a similar standoff over the debt ceiling would certainly find near-instant communications on the conservative side of the aisle to rally public support for the Republican position in favor of a balanced budget. It would generate instant, visible grassroots support amongst the tea party movement and other citizen activists. Anger, rather than being directed at Republicans, would be put on members of Congress who refused to rein in spending.

    Really, Republicans lost the 1995-96 budget battle because of self-inflicted wounds. As Tom Delay recently wrote in his book, No Retreat, No Surrender, one particular gaffe by then-House Speaker Newt Gingrich may have defined the entire debate: “He told a room full of reporters that he forced the shutdown because Clinton had rudely made him and Bob Dole sit at the back of Air Force One.”

    Delay continued, “Newt had been careless to say such a thing, and now the whole moral tone of the shutdown had been lost. What had been a noble battle for fiscal sanity began to look like the tirade of a spoiled child. The revolution, I can tell you, was never the same.” By the time the Daily News had run its infamous “Cry Baby” cover in November 1995, the political communications battle was going very badly.

    But all was not lost. Until Republican leadership in the House and Senate caved and preempted their members by striking a deal with the White House to end the November government shutdown. As Senator Tom Coburn describes in his book, Breach of Trust, “Our leadership’s reversal on the shutdown stunned us. No more than three days before our leadership told us we had to reopen the government, Republicans gathered in HC-5 in the Capitol to reinforce and reaffirm our position.”

    Republicans had ceded their leverage by reopening the government in November 1995. By the time the December shutdown rolled around, Republicans were on the defensive. When another Gingrich-Dole-Clinton deal to reopen the government was presented to the House Republican conference, they rejected it, exposing further divisions in Republican ranks. Nonetheless, Gingrich put the compromise up for a vote, and ultimately, House Republicans voted to end the shutdown.

    But they could have stood firm. They could have won. Coburn quotes George Stephanopoulos memoir, All Too Human, on what was going on in the White House at the time: “Publicly, the President was resolute; privately, he was wavering… But during the two government shutdowns that occurred in November and December, the Republican leaders themselves were our secret weapon. As much as I would love to think that we were the sole authors of our success, their self-inflicted wounds and tactical blunders made the crucial difference.”

    So, what did Republicans do wrong? They backed down. The showdown that had ensued was a political victory for Clinton, and a defeat for Republicans that made Clinton’s reelection all but certain. Which was ironic. Republicans ultimately caved and reopened the government to help shore up their electoral prospects in 1996. Clinton won handily.

    But the failed showdown did not cost them control of Congress. The election of 1994 was about spending, but is also was a repudiation of HillaryCare and “don’t-ask-don’t-tell”. Whereas Gingrich could afford to cave in 1995 and not have it immediately be a repudiation of what Republicans had been elected to do, in 2011, if Republicans mess up on spending, they know they will be repudiated by the American people.

    In 2010, there is no question the primary issues were the sovereign debt crisis, the weak economy, the government overreach of ObamaCare, and the endless bailouts and government takeovers. However the spending debate shapes up will be something of a test of manhood for the GOP. They lost power in 2006 because they spent too much taxpayer money and because of public corruption scandals. They lost in 2008 because of the hundreds of billions of dollars of bailouts and government takeovers.

    In short, Republicans never lost power for fulfilling their principles. They only lost power when they had completely abandoned those principles.

    They cannot afford to repeat their mistakes. If Republicans attach sharp spending reductions to the debt ceiling increase — say, returning the budget to baseline 2007 levels of $2.7 trillion with roughly $900 billion of savings — they have to be prepared for a filibuster or a veto.

    When the showdown over the debt ceiling occurs, House Republicans must be prepared with a clear political message and marketing strategy to get the word out. That means engaging the 24-hour news cycle, purchasing television ad time, and standing firm. They would have to work with the Senate to get something on Obama’s desk by applying pressure to individual members, especially those up for reelection in 2012. It would be a lot harder to wield the veto pen against bipartisan conference legislation from both houses of Congress.

    In the event of a filibuster or veto, Republicans would have to take their case to the American people. They should ask them if they want the Fed to continue to print hundreds of billions to lend to the government. If they want the debt to be larger than the entire economy. If they are okay with the nation’s credit rating being downgraded and interest rates rising sharply. If they want the dollar to continue to be the world’s reserve currency or if they would prefer it be destroyed.

    It comes down to choices and priorities. The United States can spend its way into the Abyss, or it can begin to turn the Ship of State around. As the Co-Chairs of the National Commission on Fiscal Responsibility and Reform reported on November 10th, “America cannot be great if we go broke.”

    Bill Wilson is the President of Americans for Limited Government.

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