Billions and Billions
The Next Debt-Limit Debacle
Republicans clearly sense that they are being outmaneuvered in the fiscal talks by the Obama administration, unable to stop the inevitable rise in tax rates for the rich. But they have one last card to play and they intend to use it, knowing it will endanger economic progress: They are threatening once again to default on the credit of the United States if President Obama doesn’t do their bidding.
Party officials say that if they do not reach an acceptable deal with the White House this month, they will wait until the country reaches the debt ceiling early next year, then refuse to lift it until they get their way on cuts to spending and taxes, The Times reported on Wednesday.
Apparently, they learned nothing from the debacle of 2011, when they first tried this extortionate tactic. The nation lost its AAA credit rating, stock values plunged, and the approval rating of Congress sank to historically low levels. Republicans portray themselves as spending hawks, but that episode cost the Treasury $1.3 billion in higher borrowing costs in 2011, according to the Government Accountability Office. Last week, the Bipartisan Policy Center estimated that the 10-year cost of higher interest rates was $18.9 billion.
Republicans savor that potential catastrophe, caring only that the threat won them $2 trillion in spending cuts over a decade from Mr. Obama. Now they want to do it again, and this time they want something the last agreement missed: big cuts to Social Security, Medicare, Medicaid and other programs that primarily benefit middle- and low-income people. Grover Norquist, who leads the party’s anti-tax cult, even suggested that the debt limit be raised only enough to get through a month at a time, so that Republicans can maximize their blackmail power.
This is one of the worst imaginable ways to run a government, and Treasury Secretary Tim Geithner is desperate to prevent it from recurring. As part of the administration’s initial fiscal offer last week, Mr. Geithner proposed a way to eliminate this threat, allowing the president to raise the debt ceiling unless two-thirds of Congress overruled him. This idea provoked immediate laughter in Republican offices in the Capitol.
“Congress is not going to give up this power,” House Speaker John Boehner said, as if the debt ceiling was enshrined in the Constitution. It’s not, of course; the limit is an unnecessary World War I era measure providing the illusion that Congress is carefully overseeing borrowing. What most people don’t know is that the limit does not affect future borrowing, but instead allows the Treasury to borrow to cover money Congress has already voted to spend. Republicans oversaw the tax cuts, war spending and recession that are the biggest components of the debt, but don’t want to take responsibility. Ending the ceiling would not in any way diminish the Congressional power of the purse.
Mr. Geithner’s proposal is a good one, but it is clear this batch of Republicans will never vote to give up its most powerful leverage.
Mr. Obama said firmly on Wednesday that he had no intention of playing the Republican debt ceiling game again. This time he might want to enlist the help of every American who holds federal, state or municipal bonds, investments that would be under threat in a debt crisis. If nothing else works, he should cite the 14th Amendment’s ban on questioning the public debt, and declare an end to the debt ceiling once and for all. The country can no longer tolerate government by brinkmanship and extortion.