Senate Majority Leader Harry Reid has a plan to get us out of the debt-ceiling crisis. He introduced a bill Tuesday night that would lift the limit until Dec. 31, 2014. If that passes, a global economic meltdown would be averted.
Until Dec. 31, 2014.
House Republicans are working on a plan, too. That plan, National Journal’s Tim Alberta reports, could be a clean, four-week extension of the debt-ceiling to help prolong fiscal negotiations. That too would prevent economic chaos.
Whether it’s four weeks from now or in one year, there’d be even less reason to put faith in a last-minute deal next time the U.S. is up against the debt limit.
There’s only one foolproof way to avoid a future crisis: Fundamentally change the way the debt ceiling works.
This approach isn’t all that radical. Sen. Barbara Boxer, D-Calif., proposed a reform in January that would change the debt-ceiling mechanism so that Congress would vote to disapprove of an increase, as opposed to approving one. Such a change would limit debt-ceiling negotiations to a veto-proof majority, while still leaving Congress with some power.
The most interesting part of this proposal? It was originally floated in 2011 by Republican leader Sen. Mitch McConnell. The potential for a bipartisan deal here that fixes the debt-limit problem is real. Sen. Boxer continues to advocate for the change. Right now though, Harry Reid’s office says the senator is not considering any disapproval mechanism. But that could change as this process moves on.
Such a plan would be obviously good for Democrats, as they can get the immediate gratification of not having to risk default in order to fully implement the Affordable Care Act. But it’d be good for Republicans too, who could not only avoid the stigma of blame for a default, but also presumably reap the ruling-party rewards in future Congresses and presidencies. It would also put an immediate political target on President Obama, and Democrats by association, for being the sole entity responsible for raising the debt limit by over a trillion dollars. That opportunity has got to sound pretty good to Republicans ahead of 2014.
Whether or not a deal is reached this time around, there’s every reason to think the nation’s next brush with the debt ceiling will be more difficult. Just look at the most obvious options for a more long-term solution to this round.
Option One is that Obama relents and gives House Republicans enough of what they want (likely on Obamacare or spending cuts) to get them to raise the limit for more than a month. If that happens, Republicans would be right to assume that, with the precedent solidly set, next time they’ll be able to extract more from the president, including on Obamacare. The president, on the other hand, would likely then be even more determined not to appear historically weak.
Option Two is that Boehner relents either this month or next and puts a long-term, clean debt-limit increase on the floor, possibly violating the informal “Hastert Rule” and torpedoing him among the House tea-party contingency. If that happens, whoever the speaker is next time (and it certainly could still be Boehner) will likely be under even more party pressure from the right not to cave to a lame-duck president this time, especially around a midterm election.
And of course, there’s a third, non-negotiation option aside from default: using the 14th Amendment to unilaterally raise the limit, which poses its own host of potential legal and economic problems. The president has all but ruled this option out.
Right now, we’re not even clearly near one of those options. Part of that is because the current debt fight is proving that each successive battle is more difficult than the one that came before it. A big reason for that is that the 2011 tussle confirmed what many people already believed: Forget the noise, at the last minute Congress will do the right thing and make a deal.
That attitude is rampant on Wall Street and the world of finance, where the managing director and chief United States economist for Morgan Stanley said that the U.S. “is not going to default, ever,” and Warren Buffett said “we’ll go right up to the point of extreme idiocy, but we won’t cross it.” An Austin, Texas, money manager at a firm that oversees $11 billion actually sees a positive here, telling Bloomberg that “the dysfunction in Washington just makes the Fed more likely to be supportive of the market,” and that we shouldn’t “worry about 72 hours in Washington.”
Financial experts, and anyone else, could be forgiven for their optimism. That’s how it worked out in 2011, when we went right to the brink of default before striking a deal. But, politically, that’s looking way more difficult now, and these experts are largely taking a view that assumes way more individual power for Boehner and Obama than they really have. Since taking the House gavel, a debt-ceiling ransom has been the GOP’s only real shot at a some form of policy win, from 2011 to the fiscal cliff. Nearly everything else Boehner’s House has done have been messaging bills that died in the Senate. Why would a politically weakened and rightwardly stretched Boehner give that up now?
Obama, on the other hand, is determined not to firmly establish the debt ceiling as the bargaining chip for House Republicans after his original sin of negotiations in 2011.
The relative sense of calm in the financial markets is just helping to prop up this political stalemate. As The New York Times‘ Andrew Ross Sorkin wrote Tuesday, “the more Wall Street is convinced that Washington will act rationally and raise the debt ceiling, most likely at the eleventh hour, the less pressure there will be on lawmakers to reach an agreement. That will make it more likely a deal isn’t reached.”
If we get an eleventh-hour deal this year, financial markets would have reason to completely write off the threat next time around, meaning market pressure a year from now could be nearly nonexistent.
The lack of obvious market panic right now is also helping to make some Republican members of Congress skeptical about the impacts of a debt-ceiling breach. Rep. Ted Yoho, R-Fla., said this week that “I think, personally, it would bring stability to the world markets.” Sen. Richard Burr, R-N.C., said he’s “not as concerned as the president is on the debt ceiling, because the only people buying our bonds right now is the Federal Reserve.”
Americans as a whole, and Republicans in particular, are suspect of how serious a breach would be, with 39 percent of Americans saying they don’t think there’d be major problems, including 54 percent of Republicans. The more the U.S. teeters on, just barely avoiding calamity, the more likely it is for Americans and politicians to think that the threat of calamity is overblown to begin with.
The alternative to the doom cycle: Change the law.
If this wasn’t already completely obvious, the debt-ceiling fight makes everyone in Congress look stupid. Most likely, most members of Congress would rather be focusing on something else. Republicans are starting to acknowledge this now as they pivot towards a short-term raise and a big fight over the CR. As Sen. Mike Lee, R-Utah, said on the Senate floor Tuesday, “no one wants to be here.” Removing the rolling deadline from Congress’s arsenal should be a win-win.
This is the country’s second lap on a dangerous — and dangerously accelerating — debt-ceiling carousel, and until there’s a change in the way the law works, no onetime deal is going to allow the country to get off.