It’s a move from the same playbook McConnell used to try to hamstring President Barack Obama in budget talks. But it’s a riskier one now, in the post-Trump era, when some congressional Republicans, with no serious agenda of their own and motivated by residual fake 2020 outrage, might be tempted to let a default happen for what they hope is a political win.
No matter how far they take their threat this time, McConnell and Republicans are counting on Americans not understanding what the debt ceiling is — that’s the only way this scam can work.
The debt limit is a legal formality. It isn’t an economic constraint on the federal government’s ability to borrow. A vote to raise it isn’t a vote for more debt; it’s a vote to fund the debts the government already owes. The debt limit exists because some policymakers would like to turn the public’s general opposition to debts and deficits into legislation that would reduce them or at least control their growth.
Indeed, Americans regularly express concern about the deficit, which is the annual increment to the debt. In practice, however, it has proved difficult to transform this concern into specific policy actions or even electoral consequences: The debt rises under both Republican and Democratic administrations. When Republicans hold the White House, some Democrats are less inclined to vote for a debt-limit increase. And as the Manhattan Institute’s Brian Riedl recently noted, Democrats could have taken care of the debt limit earlier this year.
But only one party brands its members as fiscal hawks. Republicans still try to claim that mantle, but they engage in orgies of tax-cutting (without corresponding “pay-fors”) whenever they get the opportunity. GOP notables such as former House speaker Paul Ryan, with his largely undeserved reputation as a green-eyeshade-wearing budget-cutter, have vanished from view. Despite professing outrage about deficits and debt, many tea partyers embraced Donald Trump, on whose watch the national debt rose by close to $8 trillion.
On either side of the aisle, legislators can reasonably debate what they consider the right amount of borrowing and spending, but they can’t reasonably argue that it’s anything other than derelict to play chicken with the nation’s creditworthiness.
The debt limit, which has existed since 1917, hasn’t been an effective brake on the growth of debt. It mainly allows members of Congress to pontificate on the evils of debt without requiring them to stand behind any politically painful act that would actually reduce it, such as raising taxes or cutting popular spending programs.
Nearly a half-century ago, policymakers genuinely concerned about deficits tried to create an improved budgetary system, culminating in the Budget Act of 1974. It requires Congress, at intervals, to set a limit on the federal debt. When the limit needs to be increased, specific congressional action is required — raising it can’t be just an automatic part of the appropriations process. The law created a mechanism called “reconciliation” that would facilitate deficit reduction by preventing a Senate filibuster for legislation that would affect the debt.
Unfortunately, in recent years, the budget process has become something of a joke insofar as deficit limitation is concerned: Congress simply ignores it except when it wants to use reconciliation to increase deficits with tax cuts or spending hikes.
This has left the debt limit as a merely theoretical restraint on the national debt’s climb. Everyone in Congress knows that it’s about as useful as a too-ambitious New Year’s resolution. But it still serves a demagogic purpose for the political party not in control of the White House. (Fewer Americans would blame their own member of Congress if the country defaulted on its obligations; most would blame the president.)
As McConnell put it during the 2011 debt limit crisis: “It’s a hostage that’s worth ransoming. And it focuses the Congress on something that must be done.” This time around, McConnell hasn’t specified his ransom, but it will undoubtedly be something unpalatable to Democrats. Democrats are playing their own game of chicken, with moderates and progressives not trusting the other faction to provide enough votes for final passage of both Biden’s infrastructure legislation and his overall budget proposal.
The danger, as with Cold War “brinkmanship,” is that you never know if things will go too far and someone will decide to test the nuclear option. The equivalent result in today’s budget fight would be a default, with an ensuing meltdown in financial markets if U.S. government bonds become questionable assets. Markets have always believed that a default on the federal debt would never happen. Up to now, that thinking has been right — but there’s a first time for everything: On Jan. 5, few envisioned the Jan. 6 insurrection. These days, McConnell’s caginess is offset by a lot of Republican craziness.
Whether Republicans are still only bluffing, or if they’re really ready to gamble with America’s creditworthiness just to stick it to Biden, it would matter a whole lot less if they couldn’t rely on the public’s confusion about the debt limit. If raising it were properly understood for what it is — authorization for the country to pay what it owes — then it wouldn’t be a hostage worth taking. McConnell and Republicans would look like deadbeats.
But so long as Republicans can convince voters that a debt-limit raise is runaway spending, not responsible bill-paying, they’ll have a potent way to disrupt the budget process, divert Democrats from passing popular spending programs and mask their own lack of fiscal discipline.