Is suspending the debt limit a ‘blank check’ for Obama?

“I think it showed that all the Democrats in the Congress were completely willing to give the president a blank check to borrow whatever he wanted. Most of the Republicans weren’t.”

–Former senator Jim DeMint (R-S.C.), president of the Heritage Foundation, on CBS’s “Face the Nation,” Feb. 16, 2014

We have been critical in the past when lawmakers such as Rep. Michele Bachmann (R-Minn.) referred to an increase in the national debt as “a $2.4 trillion blank check.”  After all, how many “blank checks” have a number attached to it?

But the Heritage Foundation says the recent suspension in the debt ceiling justifies the use of the phrase “blank check” because there is actually no number attached to it. That’s because Congress did not merely lift the debt ceiling to a new height but actually eliminated it until March 16, 2015. That little wrinkle has received little media attention so let’s take a closer look.  (Why is there a debt limit in the first place? Read our history lesson.)

The Facts

Generally, Congress has lifted the debt ceiling to cap the amount the Treasury Department can borrow, but twice in the last year, it opted to briefly “suspend” the debt ceiling and then automatically increased the limit to the level of debt outstanding when the suspension expired. Now, in the bill that passed Congress last week, the debt ceiling is suspended for a full year.

In effect, that means there is no debt limit for a year.

Romina Boccia, a Heritage budget analyst, argues that this means the “blank check” analogy applies. She notes that experts estimate that by next March, the national debt will increase by $1 trillion. But there is no actual limit on the amount of debt the Treasury can issue.

“When Congress suspended the debt limit through March 15, 2015, it did not limit the Treasury’s borrowing at all,” she wrote. “The debt limit will not bind the Treasury until midnight on the day the suspension expires. This is like Congress handing the executive a blank check with an expiration date.”

Boccia acknowledged that that two-thirds of federal spending stems from laws that Congress passed years ago, establishing such programs as Medicare and Social Security, and thus more or less operates on autopilot. Any change in that spending, in other words, would require a new law passed by Congress. Only about one-third of federal spending is what is known as discretionary spending—money subject to annual appropriations. But she said the debt limit is “a decisive, action-forcing moment for Congress to take charge of the automatic spending increases that are driving the U.S. spending and debt crisis.”

Boccia’s commentary was mostly focused on Congress but Mike Gonzalez, spokesman for Heritage, defended DeMint’s phrasing that this was a blank check for Obama. “Congress has now removed the one leverage it had to stop the President from happily borrowing excessive amounts,” he said. “If President Obama succeeds in pushing an agenda that expands federal spending through Congress, there is no limit on borrowing to discourage it.”

But is this a distinction without a difference?

Ed Lorenzen, a congressional budget expert who is senior adviser to the Committee for a Responsible Budget, said that lifting or suspending the debt ceiling accomplishes essentially the same thing—restricting the issuance of debt for a finite period of time.  “Suspending the debt limit for a specified period of time does provide somewhat more certainty about the amount of time when Treasury’s authority to issue debt will expire, but it does not give any greater ability to issue debt than an increase in the dollar amount,” he said. “In both cases, Treasury is only able to issue debt necessary to meet existing obligations already in law.”

Lorenzen noted that section 3 of the bill explicitly limited the suspension to debt issued to meet obligations in law that must be paid during the suspension period  (“such obligation was necessary to fund a commitment incurred pursuant to law by the Federal Government that required payment before March 16, 2015”) and  prohibited the issuance of debt to increase cash balances in excess of normal operating balances.

David Woltornist, special assistant to the vice president at Heritage, counters that the clause demonstrates why there is now a blank check.

“If the country experienced a recession this year during which revenues fell sharply and welfare payments rose steeply, the Treasury could borrow hundreds of billions more with no debt limit through March 15, 2015,” Woltornist said. “By point of contrast, if the Treasury didn’t have a blank check to borrow, then the department would have to appeal to Congress for additional borrowing authority once the debt limit was reached. As it is with the suspension, regardless of how much borrowing occurs between now and March 15, 2015, the Treasury will not run out of borrowing authority but will simply fill in the dollar amount on its blank check on March 16, 2015.”

But Stan Collender, another longtime budget analyst, predicts that the suspension will demonstrate that the debt ceiling is not necessary to control federal spending. Restraints on government spending are “accomplished with other statutes like the Budget Control Act that put in place caps on appropriations, and with authorizations that govern each mandatory program,” he wrote on his blog.  “The debt ceiling only allows the government to borrow to make good on the spending and revenue laws that are already on the books. Not being able to borrow more in no way eliminates the government’s legal obligation to spend and tax.”

Note that Gonzalez had said that suspension of the debt ceiling is a problem “if President Obama succeeds in pushing an agenda that expands federal spending through Congress.” Given the make-up of the current Congress, what are the chances of that?

Update, Feb. 20: Heritage provided a fuller response to this fact check.

The Pinocchio Test

To some extent, perhaps DeMint was simply making a rhetorical point, though one that was highly partisan. (He faulted Democrats for handing out a “blank check” to Obama, but one could also argue that the Democrats acted to prevent a default on the national debt that would have alarmed the markets.)

But in the federal budget, it takes two to tango. The Treasury is only authorized to pay bills that Congress has approved, and thus it is a stretch to claim that Obama has been handed a “blank check.” Suspending the debt limit for a defined period of time, as opposed to setting the debt limit at the defined level, does not change that balance of power. While Woltornist is correct that a recession or some other economic crisis would automatically boost spending, without Congress being forced to immediately deal with the debt ceiling, such spending would merely be the result of laws that Congress previously passed. In any case, the time limit in the law means Congress would be forced to confront the issue again.

Two Pinocchios

 


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Glenn Kessler has reported on domestic and foreign policy for more than three decades. He would like your help in keeping an eye on public figures. Send him statements to fact check by emailing him, tweeting at him, or sending him a message on Facebook.
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