Congress Must Stop Using Default as a Weapon

In this hostage crisis, a concession by Obama tied to the debt ceiling or CR would ensure that presidents would become regular instruments of extortion.

Sen. Ted Cruz (R-TX), listens to testimony during a Senate Judiciary Committee hearing on April 22, 2013.
National Journal
Norm Ornstein
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Norm Ornstein
Oct. 9, 2013, 2:43 p.m.

How do we get out of this mess? We know it won’t be easy, and we know that there is a tan­gible chance that we will de­fault. As a top House Re­pub­lic­an staffer told Na­tion­al Re­view’s Robert Costa the oth­er day, “It’s the House of in­de­cision. We don’t have the votes for a big deal, small deal, or short-term deal.” I will get to one pos­sible way out, but first I need to vent. To be­gin, this is en­tirely an en­gin­eered crisis per­pet­rated by House Re­pub­lic­ans with Sen­ate al­lies, hatched, as we now know, by out­side in­di­vidu­als and groups in­clud­ing Ed Meese, Her­it­age Ac­tion, and the Koch broth­ers. We know that John Boehner really did not want a shut­down, and that he had agreed to a clean con­tinu­ing res­ol­u­tion after Sen­ate Demo­crats ca­pit­u­lated in en­tirety to his party’s de­mands on ap­pro­pri­ations — mean­ing a con­tinu­ation of the se­quester and the much lower over­all spend­ing num­bers of the Ry­an budget (in­clud­ing high­er spend­ing for de­fense.)

But Ted Cruz and Boehner’s own rad­ic­al House fac­tion pushed the speak­er to renege on that deal and in­stead de­mand the de­fund­ing of Obama­care as a con­di­tion for keep­ing the gov­ern­ment open. Boehner did not ask that some por­tions of the gov­ern­ment — in­clud­ing the World War II Me­mori­al, death be­ne­fits for fam­il­ies of ser­vice­men and wo­men, NIH can­cer tri­als — be kept open. He and his al­lies made clear that his de­mands ap­plied to all gov­ern­ment covered by ap­pro­pri­ations. Try­ing to wriggle out of this un­ten­able situ­ation, Boehner tried to mol­li­fy his rad­ic­als by sug­gest­ing in­stead that their de­mands be tied to the debt ceil­ing — and we ended up with the worst of both worlds.

I have had some sym­pathy for Boehner, who is be­ing buf­feted by forces in his party bey­ond his con­trol, with any at­tempt at lead­er­ship thwarted by a lack of fol­low­er­ship. But my sym­pathy for him dis­ap­peared after his ut­terly disin­genu­ous press con­fer­ence Tues­day. The speak­er talked about how all he wanted was to have a con­ver­sa­tion and ne­go­ti­ation over spend­ing is­sues, and that the fail­ure to do so was un-Amer­ic­an — this from the same speak­er who, since the Sen­ate ad­op­ted a budget sev­er­al months ago, has stead­fastly re­fused to ap­point con­fer­ees to ne­go­ti­ate over the budget, after years of in­sist­ing that was all he wanted. The speak­er sug­ges­ted in his press con­fer­ence that a clean CR, as pro­posed by Pres­id­ent Obama, would mean total ca­pit­u­la­tion by Re­pub­lic­ans — ca­pit­u­la­tion to the num­bers he de­man­ded!

Boehner also sug­ges­ted that threats over the debt ceil­ing were routine. False. Be­fore 2011, as Tom Mann and I point out in It’s Even Worse Than It Looks, the use of the debt ceil­ing as a polit­ic­al tool was lim­ited to nar­row is­sues dir­ectly re­lated to budget pri­or­it­ies. The rank and reg­u­lar hy­po­crisy sur­round­ing votes on the debt ceil­ing — en­gaged in by Sen. Barack Obama — by which a pres­id­ent’s par­tis­ans de­fen­ded the need to pro­tect the full faith and cred­it of the U.S., and his ad­versar­ies talked about the need for fisc­al dis­cip­line (be­fore re­vers­ing roles when the oth­er party took over the White House), was seen by all as a kind of game. Nobody in a po­s­i­tion of in­flu­ence truly wanted a de­fault, and party lead­ers al­ways kept some votes in re­serve in case the threat be­came real.

The idea of threat­en­ing de­fault in a real way — de­mand­ing out­land­ish con­ces­sions with a loaded gun to the coun­try’s head — only emerged in 2011. We es­caped de­fault when Mitch Mc­Con­nell swooped in at the last minute to craft a deal — but the fu­ture be­came clear soon there­after when a can­did Mc­Con­nell told The Wash­ing­ton Post about the fu­ture of the debt ceil­ing, “What we did learn is this: It’s a host­age that’s worth ransom­ing.” This year the host­age drama is more fright­en­ing. Mc­Con­nell is AWOL this time. And the fantasy be­lieved by many prom­in­ent GOP­ers about the con­sequences of de­fault make it easi­er for them to push to the brink and over in­to the abyss. It may have come as no sur­prise when Rep. Ted Yoho, a veter­in­ari­an, said that a de­fault would be great be­cause “it would bring sta­bil­ity to the world mar­kets.” But when Tom Coburn, who should know bet­ter, says that there is no debt ceil­ing and that if we fail to raise the debt ceil­ing “we’ll con­tin­ue to pay our in­terest, we’ll con­tin­ue to re­deem bonds, and we’ll is­sue new bonds to re­place those,” it tells us that there are way too many law­makers in a bubble of un­real­ity. In con­trast, there’s this from Bloomberg News: “Among the dozens of money man­agers, eco­nom­ists, bankers, traders, and former gov­ern­ment of­fi­cials in­ter­viewed for this story, few view a U.S. de­fault as any­thing but a fin­an­cial apo­ca­lypse.”

Enough vent­ing. The bot­tom line here is that we need some kind of agree­ment that will re­open the gov­ern­ment and stop a down­ward spir­al that uses de­fault as a genu­ine and fright­en­ing polit­ic­al weapon. Real­ist­ic­ally, qua Ne­go­ti­ation 101, it must provide the pres­id­ent, the speak­er, and the Sen­ate ma­jor­ity lead­er with the abil­ity to de­clare vic­tory or at least to avoid the per­cep­tion of ut­ter de­feat. The two houses, two parties, and the pres­id­ent will still have to deal with one an­oth­er on a myri­ad of is­sues for the next 40 months.

Ne­go­ti­ation now re­quires a cool­ing-off peri­od — a clean ex­ten­sion of the debt ceil­ing, and a tem­por­ary CR. Then a re­open­ing of the gov­ern­ment for the year, with the un­der­stand­ing that a new com­mis­sion will be es­tab­lished to dis­cuss big long-term debt is­sues, is feas­ible.

But any con­ces­sion by the pres­id­ent that is tied to a short-term CR or a short-term ex­ten­sion of the debt ceil­ing would be dis­astrous. Ba­sic func­tions of gov­ern­ment and the full faith and cred­it of the U.S. would be­come reg­u­lar in­stru­ments of ex­tor­tion in the fu­ture, res­ult­ing in peri­od­ic dis­plays of Amer­ic­an dys­func­tion and in­com­pet­ence to the world, with ser­i­ous eco­nom­ic con­sequences. But a con­ces­sion on a dif­fer­ent agenda — to take the debt ceil­ing per­man­ently off the table as a host­age — is well worth it. What Obama needs to of­fer now is a pro­pos­al to make per­man­ent 2011’s one­time “Mc­Con­nell Rule.” Un­der that pro­ced­ure, de­vised by the minor­ity lead­er, the pres­id­ent could uni­lat­er­ally raise the debt lim­it and Con­gress could have the op­tion of block­ing it by way of a res­ol­u­tion of dis­ap­prov­al. The pres­id­ent, in turn, could veto the res­ol­u­tion of dis­ap­prov­al; a vote of two-thirds of both houses would be re­quired to over­ride the veto.

In re­turn for that ac­tion, if the pres­id­ent agreed to re­move the tax on med­ic­al devices (and re­place it with an­oth­er source of rev­en­ue to help fund Obama­care), or agreed to some ad­di­tion­al mal­prac­tice re­form — neither ac­tion hit­ting at any es­sen­tial core parts of the health care law — it would be a win-win. If, in ad­di­tion, Boehner simply ac­cep­ted yes for an an­swer on re­open­ing the gov­ern­ment, at­tain­ing the Ry­an budget num­bers, we could all move past this em­bar­rass­ing crisis. At that point, maybe we could craft a pro­cess that man­ages the budget pro­cess in a less de­struct­ive way.

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