The Weekly Sift

The chaos surrounding the Speaker vote may be a preview of a far more consequential vote this summer.

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As the House of Representatives endured round after round of voting for a new speaker, most of America probably didn’t take the turmoil all that seriously. It was just Congress being dysfunctional again, and we knew already that the next speaker would be a Republican. Obviously, Kevin McCarthy cared which Republican it would be. But why should we care?

The answer to that question is simple: The battle for the speakership probably doesn’t matter much in itself, but it’s a preview of future votes that will matter. Electing a speaker was the first of a handful of must-do items every Congress faces. The others — appropriating money to keep the government functioning and giving the Treasury permission to borrow money to pay the country’s bills — have very real consequences.

If the speakership was this difficult to decide, what’s going to happen when the other must-do items come up?

In each of those cases, the House is one of the three powers that need to agree; the Senate and the President are the others. So over the next two years, Kevin McCarthy, Chuck Schumer, and Joe Biden will occasionally have to go into a room and come out with an agreement they all support. That agreement will then need to get majorities in both the House and Senate.

Otherwise bad things will happen.

McCarthy’s precarious hold on the speakership makes him a difficult negotiating partner: If he recognizes that he represents only 1/3 of the power in the room and makes realistic compromises, he might well be deposed when he takes that agreement back to the Republican caucus that elected him. And whatever he agrees to, he may not be able to deliver the votes to pass it.

The upshot is that the other must-do items on Congress’ agenda may not get done, or may face lengthy delays. The two possible consequences of that inaction are a government shutdown and a debt-ceiling crisis.

Government shutdowns are a nuisance. Hitting the debt ceiling would be a disaster. There have been a number of government shutdowns over the years, including a 35-day shutdown just four years ago (when President Trump backed out of an agreement that didn’t include funding for his border wall). So most Americans have at least a vague understanding of what happens: The mail still gets delivered and Social Security checks go out, but hundreds of thousands of other government workers go home, creating work-backlogs that ultimately cost billions to resolve.

It’s a nuisance and a waste, but the country survives it.

But Americans have a much shakier understanding of a debt-ceiling violation, which has never happened. Twice — in 2011 and 2013 — a Republican Congress played chicken with President Obama over the debt ceiling, but disaster was avoided both times. (The debt ceiling was increased three times under President Trump, including once in 2019 after Democrats took control of the House.)

The main thing you need to understand about hitting the debt ceiling is that it would be a much bigger deal than a government shutdown, and would create havoc in both the US and the world economy.

What the debt ceiling is. The debt ceiling (or debt limit) is a legal cap on the amount of money the United States can borrow. It was established in 1917, and is a relic from an era when Congress didn’t have a budgeting process anything like the current one.

The current process is that Congress passes a budget with spending and revenue targets, and then passes individual appropriation bills within that framework. You might think that passing a budget with a deficit would automatically authorize borrowing to fill the gap, but it doesn’t. Having passed those bills, Congress can then refuse to raise the debt limit, creating a contradiction in the laws.

Other countries don’t do this. Only the US and Denmark have a debt ceiling, and Denmark’s political parties never play chicken with it.

Fundamentally, the US debt limit is just a dumb idea. Remember the various Star Trek episodes where the Enterprise’s self-destruct option played a role? The captain (and maybe some other officers) would have to go through a detailed authorization process to start the clock counting down. Our debt ceiling is like a self-destruct process that works the other way: Self-destruct will engage automatically unless the officers regularly go through some complicated process to stop it.

Arguably, Democrats should have abolished the debt limit while they had control of Congress, or at least raised it far enough to keep the issue at bay for another two years. The recent omnibus spending bill would have been the place to do it, but it was hard enough getting Mitch McConnell’s cooperation as it was.

The politics of the debt ceiling. For almost a century, debt ceiling debates were political theater without any real drama. It was an opportunity for the party out of power to bemoan the country’s fiscal health, and members of each house would cast symbolic votes against raising the ceiling. (Senator Barack Obama made such a speech and cast such a vote in 2006.) But everybody knew the bill had to pass, and it always did.

Occasionally other measures would get tacked onto a bill to raise the debt ceiling. In the 1980s and 1990s, a series of reforms to Congress’ budgeting process were added, like the Budget Reform Act of 1990. These were process bills (with bipartisan support) that made it more difficult to pass unbalanced budgets in the future. They did not directly raise taxes or cut spending.

That changed after the Tea Party wave election of 2010. In both 2011 and 2013, Republicans used the threat of breaching the debt ceiling to try to extort severe spending cuts out of President Obama.

Where is the debt ceiling now? The current ceiling (set in December, 2021) is a little less than $31.4 trillion, and the current debt is getting close to that number. There are certain accounting games (which I don’t understand) that the Treasury can play around the margins, but the best guesses are that if nothing is done, the limit will be reached sometime this summer.

What that means is that the Treasury will only be able to sell new bonds as old bonds come due. It will not be legal to sell bonds to pay for the government’s new financial obligations, like interest payments or salaries or Social Security benefits.

Recent annual deficits have been running at around $1 trillion (after peaking at $3.1 trillion in fiscal 2020, the last full year of the Trump administration). So assuming the economy perked along nicely in every other way, a post-debt-ceiling government would have to find $80-100 billion in cuts every month — and probably a lot more than that, because the economy would NOT perk along nicely, resulting in decreased revenues and increased obligations.

Think about the position that would put the Biden administration in: US law limits the revenue it can collect and obligates it to make certain payments (like Social Security benefits, salaries for our soldiers, and interest payments to bond holders). But if those numbers don’t balance and it is forbidden to borrow, there is no legal path for the administration to take. The laws contradict each other, so whatever he does, President Biden will be violating his constitutional duty to “take care that the Laws be faithfully executed”.

The US Treasury will be like a family that has to decide which bills to pay after they cash a paycheck. (“Is the WalMart payroll tax payment in yet? Oh, good, we can reimburse a few of those hospitals that have been taking care of Medicare patients.”)

The main effect on the world economy would result from no one knowing what US Treasury bonds are really worth. (Will the interest be paid? What happens when the principal comes due?) Banks around the world keep their reserves in US bonds, so many of them could become insolvent, starting a banking crisis. No one can predict how far that effect would snowball, as a bankruptcy here makes somebody else insolvent, leading to a new bankruptcy there.

Would Biden have any legal options? Maybe. Many possibilities were discussed in 2011 and 2013, but they’re all of the play-stupid-games, win-stupid-prizes variety. (Paul Krugman expressed this sentiment in more sophisticated Princeton-professor terms: “Outrageous behavior demands extraordinary responses.”)

One proposal that sounds like a joke, but was seriously discussed in 2013 was the trillion-dollar-coin. Apparently, a loophole in the law allows the Treasury to create platinum coins of any value.

The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

The intent was to allow the Treasury to make occasional commemorative coins for collectors. But desperate times …

So in this scenario, the Treasury mints a single trillion-dollar coin, which it then takes to a Federal Reserve bank and deposits in the government’s account. Presto! There is now money to meet the government’s obligations.

The general opinion of both the Obama and Biden administrations was/is that such a scheme is beneath the dignity of the United States. But you never know.

“But if that’s what it takes …” There’s a school of thought that says hitting the debt ceiling is the lesser evil: Our steadily increasing debt is unsustainable, and if a crash into the debt ceiling forces the government to only spend what it takes in, that’s all to the good.

That debt’s unsustainability is debatable. (Japan’s national debt is two-and-a-quarter years’ GDP, and they show no signs of collapse. The US debt is one-and-a-quarter years’ GDP.) The important thing to note here is that Congress could balance the budget whenever it wants, by raising taxes and/or cutting spending. That happened at the end of the Clinton administration, so it’s not impossible.

The reason a balanced budget doesn’t happen is that the voters don’t really want it to. Balanced budget is a phrase that polls well, but when you get down to the details, people don’t want to pay higher taxes or give up their health insurance to make it happen. And while it’s not hard to find the occasional $600 hammer or bridge-to-nowhere in the federal budget, you’re not going to find a trillion dollars of that stuff, year after year.

Also, it’s hard to take Republican deficit hawks seriously when they ignored the deficit completely during the Trump years, and instead passed a budget-busting tax cut for corporations and the rich. (One thing I can guarantee you: If there’s a debt-ceiling or government-shutdown crisis sometime in the next two years, Republicans will say that tax increases are off the table.)

But suppose you are the rare good-faith Republican deficit hawk who is not just trying to create an artificial crisis for a Democratic president. What should you do? Convince the voters. You should try to build a popular majority around the idea of a balanced budget — a real balanced budget, with numbers backed by actual taxing and spending policies, and not just the words “balanced budget”. Then your popular majority could elect a House, Senate, and president to implement your balanced budget (which Republicans definitely did not do the last time they controlled all the levers of power).

What you shouldn’t do is stand over the self-destruct button and threaten to press it unless you get your way. That’s not democracy. That’s hostage-taking. It’s terrorism.

Hostage-taking? Terrorism? Really? Hostage-taking and terrorism are pejorative terms that are nothing more than insults if they’re not defined. So here’s what I mean by them: hostage-taking is a negotiating tactic based on threats rather than positive offers; in particular, the hostage-taker threatens to do something that does not benefit him or her, and usually claims that s/he does not want to do it.

So when a kidnapper asks for ransom to give your daughter back, at some level that looks like a trade: money for your daughter. But it’s not a positive offer, because the kidnapper is only offering to restore what he took away. The proposed final deal is that the kidnapper gets money, and (at best) you get back to square one, minus the money.

The alternative to the ransom is that the kidnapper will kill your daughter, which he claims he doesn’t want to do. (“I’m not a monster. I don’t enjoy killing little girls.”) So neither of you wants the kill-the-girl option, but the kidnapper is counting on the fact that you are so desperate to avoid it that you’ll do anything else instead.

Terrorism is a political tactic: the attempt to gain a political advantage through threats of destruction.

In the case of the debt ceiling, it’s instructive to read Republican speeches from previous debt-ceiling crises. In 2013, for example, John Boehner acknowledged that the US was on the path to defaulting on its debt if the ceiling wasn’t raised, and acknowledged on another occasion that “Yes, allowing America to default would be irresponsible.” But Republicans didn’t frame this looming disaster as a common peril that they and President Obama should work together to avoid. Instead, Obama should pay for their cooperation by making concessions without getting anything in return. According to Ted Cruz:

Republicans were looking for three things before raising the debt ceiling: a significant structural plan to reduce government spending, no new taxes, and measures to “mitigate the harm from Obamacare.”

So Obama should scrap his signature program while agreeing to spending cuts Republicans wanted, with no indication of any priority Republicans might compromise on. The upshot was just: “Do what we want, or the country gets it.”

Next summer’s crisis. A new hostage-taking crisis was in the background of this week’s speaker election. Nearly all the 20 Republican holdouts who blocked Kevin McCarthy’s election for 14 ballots were also supporters of the January 6 insurrection, and are now gearing up for debt-ceiling battle. They were terrorists two years ago, and they’re terrorists now.

McCarthy critic Rep. Ralph Norman (R-S.C.) said he wanted McCarthy to devise a debt-limit deal suitable to fiscal conservatives. “Is he willing to shut the government down rather than raise the debt ceiling? That’s a non-negotiable item.”

We can only hope that Norman and other Republican congressmen understand the difference between a government shutdown and a debt default, or that they will pay attention when someone explains it to them.

CNN reported being told by anti-McCarthy holdout Scott Perry that he had gotten a promise from McCarthy that he would oppose a clean debt-ceiling increase, i.e., one with no ransom demands. The procedural concessions McCarthy has made mean that he can be recalled as speaker if he doesn’t negotiate a high enough ransom. Jonathan Chait doubts that any amount of ransom will be enough.

Imagine a Republican Speaker — any Republican Speaker — figuring out a ransom that almost the entire caucus could agree on. The intraparty dynamics virtually guarantee that anything a Republican leader could agree to would immediately be seen on the far right as too little. All is to say that even if you think Biden ought to negotiate a debt-ceiling-ransom demand, it’s now a practical impossibility.

What the government spends money on. Like balanced budget, the phrase spending cuts tends to poll well in the abstract. There’s a widespread feeling — especially on the right, but also in the electorate at large — that the government spends too much money.

The problem is that most people who feel that way don’t have a clear notion of what the government spends money on. They imagine a budget full of foreign aid, welfare payments to people who don’t want to work, and boondoggle projects that don’t serve any purpose.

If you look at where the money actually goes, though, it’s clear that you can’t make a sizeable dent in federal spending without cutting health care, pensions, or defense. As the population ages, an ever-increasing amount of money will get spent on Social Security and Medicare.

When you understand the reality of federal spending, you see that any serious balance-the-budget deal that doesn’t include major tax increases will have to make significant cuts in Social Security and Medicare. And the Republicans have never run on that platform. “Cut Social Security and Medicare so that the rich can keep the Trump tax cuts” is an absolutely suicidal political platform. That’s why the only way to implement it is through terrorism. They’ll never get there through the democratic process.

The best-case scenario. The main power of the Speaker is to control what comes up for a vote in the House. But there is a way around it: a discharge petition. If a majority of the House members sign a petition to bring a bill to the floor, the Speaker has to allow a vote on it.

Republican Rep. Brian Fitzpatrick suggested that a discharge petition might be how the debt ceiling gets raised. It would only take five Republicans and all the Democrats to make that happen.

The problem, though, is similar to the problem of impeaching Trump a few years ago: The Republicans who signed such a petition would be marked for primary challenges and probably voted out.

Are there still five Republicans in Congress with that kind of courage? We may find out.