05.08.2013 0

What is the GOP’s Debt Ceiling Strategy?

By Robert Romano

Appearing recently on Fox News’ On the Record with Greta Van Susteren, House Budget Committee Ranking Member Chris Van Hollen wanted to know where the House Republicans were on budget negotiations.

“The House has passed a budget, the Senate has a budget,” he said. “The next step as you know is to have a budget negotiation in conference.”

Van Hollen has a point. In Civics 101 that is basically what happens when both houses of Congress pass differing pieces of the same legislation. Isn’t this what Republicans wanted when they made such a big deal out of their “No budget, no pay” campaign to force the Senate to pass a budget?

Well, it worked. The Senate passed a budget. Now what?

One will recall that “No budget, no pay” was supposed to stand in contrast with proposals such as tying “Cut, cap, and balance” to an increase in the debt ceiling, using the borrowing limit as leverage to extract spending cuts. “No budget, no pay” was supposed to take the brinksmanship out of the debt ceiling negotiations.

Now, a little more than a week before the debt ceiling suspension is supposed to be lifted on May 19, and members of both parties are waiting to the last possible minute to present their plans.

Speaking to the Financial Times, a House Republican aide suggested that “important to remember, it’s very early, I’d be surprised if the leaders on both sides have even finalized their opening bids internally.”

Early? With the debt ceiling suspension ending in mere days, one hopes the aide is simply wrong. House Republicans should have already mapped out their plan of what to do when they voted to suspend the debt ceiling back in January.

But whatever that strategy might be, they have yet to present it to the American people.

Obama on the other hand has made clear that it would just like to get rid of the debt ceiling altogether. At a Jan. 14 press conference, he suggested, “if the House and the Senate want to give me the authority so that they don’t have to take these tough votes, if they want to put the responsibility on me to raise the debt ceiling, I’m happy to take it.”

No ambiguity there from the White House. It does not want any preconditions attached to a vote on the debt ceiling, but all things being equal, it’d be even happier just eliminating the debt ceiling. But what do Republicans want?

The Wall Street Journal’s Kim Strassel in a recent column wrote, “The real divisions in today’s Republican Party are not so much over ideology as they are over strategy.” Well, yeah.

In truth, the debt ceiling is a point in case. So, let’s measure outcomes. In 2011, House Republicans insisted on using the debt ceiling to achieve concessions from the White House on spending.

It worked. There would be no cuts to budget authority totaling about $90 billion a year now in the form of sequestration if the tactic had not been used.

In contrast, what has the soft line debt ceiling suspension, “No budget, no pay” approach achieved in the way of spending cuts? So far, nothing. Just Senate Democrats passing a budget that eliminates sequestration and increases spending. And calls for a conference committee, presumably to pressure Republicans into eliminating sequester and increasing spending.

Have Republicans given up on using the debt ceiling as leverage? If so, it might be the equivalent of folding with a pair of aces in poker.

In fact, according to data from the Office of Management and Budget (OMB), since 1976, the only years discretionary spending budgeting authority was reduced were in 2012, 2011, 2010, 1996, 1995, 1994, 1993, 1992, and 1986. Just 24 percent of the time.

At least three of those years (2010-2012) were in years when Congress was budgeting by continuing resolution, not appropriations. Much of the recent decrease was “stimulus” spending expiring. But there were also reductions in budget authority achieved in the March 2011 continuing resolution, and during the sequester that passed in August 2011.

It should also be noted that the nominally balanced budgets of the late-1990’s, although the debt was still increasing at the time, were achieved under the threat of government shutdowns.

So, using must-pass votes like the debt ceiling and continuing resolutions as leverage has achieved real, quantifiable cuts. Otherwise, when the budget process operates as normal, spending has tended to increase uncontrollably.

In the meantime, the GOP has been busy arming Democrats with incredible leverage of their own—particularly, with consideration of a highly flawed version of the “Full Faith and Credit Act” by the House Ways and Means and Committee.

The principle behind such legislation is a good one—that in the event the debt ceiling is reached, the U.S. will still be able to pay its most essential bills and avert default. To that end, the legislation prioritizes principal and interest on debt held by the public and “held by the Old-Age and Survivors Insurance Trust Fund and Disability Insurance Trust Fund” that help finance Social Security benefits.

But what about the $325 billion of treasuries held in the Hospital Insurance Trust Fund and the Supplemental Insurance Trust Fund, that helps pay for Medicare benefits?

Moreover, what about prioritizing Social Security and Medicare benefits out of existing revenue? What about funding essential military functions and national security priorities plus veterans’ benefits while Congress and the White House negotiate the debt ceiling?

As much as anything, a properly constructed “Full Faith and Credit Act” should insulate Congress from charges that it is paying foreign creditors like China and Saudi Arabia, plus big banks, but hanging Grandma and the troops out to dry.

Because these things are not prioritized, the current approach, to say the least, would be a political buzzsaw.

So, Ms. Strassel is quite correct that strategy is a source for real division among Republicans. And on the debt ceiling, one struggles to find a coherent plan that would result in anything but Republicans being steamrolled and perhaps the borrowing limit, the only restriction on government spending and borrowing, winds up being eliminated altogether.

Robert Romano is the Senior Editor of Americans for Limited Government.

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