Russian leader Vladimir Putin quoted Leo Tolstoy after his summit meeting with President Biden: “There is no happiness in life. Only a mirage of it.”
I’m not a devotee of Tolstoy or Russian literature. But there is a reason my wife sometimes refers to me as “Dr. Doom.” To me, the glass is more than half empty, if not down to the dregs. For some reason, I root for the Cincinnati Bengals. A Cincinnati sportswriter once summed up the plight of all Bengals fans with this gem: “The bigger the stakes, expect the worst and you’ll never be disappointed.”
Which brings us to the point of today’s missive:
I am writing to officially ruin your summer.
If you work on Capitol Hill or report on Congress, buckle in. Congress is rapidly approaching a fight over the debt ceiling.
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Washington will likely hit the debt limit at the end of July. That means the federal government will exceed the statutory threshold of how much money it’s allowed to spend in about five weeks – unless Congress acts.
Fights over the debt ceiling are usually epic. There are battles in Congress. And then there are battles in Congress. Scraps over the debt ceiling are of a completely different kingdom/phylum/class/order/family/genus/species compared to even other legislative brawls.
Consider the debt ceiling donnybrook in the summer of 2011.
Tea party Republicans (remember them?) had just propelled the GOP to the House majority in the fall of 2010. Many Republicans ran on the promise of lower federal spending. They were more than happy to tangle with President Obama on the issue. Many GOP leaders fanned the flames of the fight for political purposes – even though they knew Congress and the president would have to eventually forge a bipartisan debt ceiling accord.
“It’s an effective, action forcing event,” said Brett Loper, a top aide to former House Speaker John Boehner, R-Ohio, during the 2011 debt limit fracas. Loper noted that “a large number” of Republicans believed voters elected them in 2010 “to really force action on budgets, deficits and debt. So this just became a real focal point for them to utilize.”
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Loper crafted the ultimate debt ceiling agreement, which introduced sequestration, a mandatory set of caps on “discretionary” spending. Discretionary spending is the side of the ledger that Congress controls and allocates every year. But sequestration was the “backup.” A so-called bipartisan, bicameral, “super committee” was charged with negotiating an agreement to shave at least $1 trillion in spending. However, that panel failed. Sequestration was the penalty.
Still, the U.S. didn’t hit the debt ceiling.
“You have to be careful playing with this,” said Loper. “In 2011, credit rating agencies actually downgraded the U.S. Treasury debt as a result. It’s a very careful tightrope.”
A failure to lift the debt ceiling could risk a market shock or downgrade the federal government’s credit worthiness.
“Any dip in the credit rating would have, in my humble judgment, a very negative effect on the markets. The bond market especially,” observed Jim Dyer, former staff director of the House Appropriations Committee. “I can’t conceive of any circumstance whereby this Congress would go off in August for a five- or six-week break without making sure that the government can pay its bills well into the fall.”
Republicans may be unwilling to work with Democrats to incur more debt. This comes especially after Democrats unilaterally approved a staggering $1.9 trillion in COVID aid in March. Most Republicans were more than happy to join Democrats (after some major skirmishes) to approve the previous five, expensive coronavirus bills last year. But now Democrats control the House, Senate and White House. Democrats are toying with the idea of going it alone and spending as much as an eye-popping $6 trillion on infrastructure.
So, with the midterm elections pending, you can only begin to imagine the politics of this issue.
Sen. Rick Scott, R-Fla., has advocated a plan to require a two-thirds vote to raise the debt ceiling unless Congress imposes spending controls. Scott is also chair of the National Republican Senatorial Committee (NRSC), the national organization of electing GOPers to the Senate for the 2022 cycle. That’s why Scott and other Republicans are more than happy to make vulnerable Democrats facing competitive reelection bids next year squirm over a possible debt ceiling vote. Think of the plight awaiting Sens. Mark Kelly, D-Ariz., Raphael Warnock, D-Ga.,, Maggie Hassan, D-N.H., and Catherine Cortez Masto, D-Nev.
The Treasury Department often wields an option to avoid an immediate debt ceiling collision. It’s called “extraordinary measures.” This gambit is the fiscal equivalent of rooting through the couch cushions for loose dimes and nickels. Treasury can often extend the concrete deadline for the debt ceiling for a few days or even weeks. But it’s unclear how much agility Treasury may have this round after the federal government spent such a staggering amount of money over the past 16 months.
Nonetheless, Congress may have an escape hatch on this: the infrastructure bill. Granted, the path to Congress approving any infrastructure package is far from settled. But it’s possible lawmakers could latch a debt ceiling increase onto an upcoming infrastructure plan. Moreover, it’s increasingly plausible that Congress must approve any infrastructure bill via a special process known as “budget reconciliation.” That enables Congress to pass bills through the Senate without the threat of a filibuster. Such bills also just need to score a simple majority for passage. The special budget rules also require measures be fiscal in nature. So something like police reform probably wouldn’t qualify for the reconciliation process. But increasing the debt ceiling would. And, latching the debt ceiling to an infrastructure package probably softens the political blow, including such a controversial measure in a legislative sidecar.
It’s always easier to coax reluctant lawmakers to take one challenging roll call vote rather than two.
“The only caution I would advance is that we still not have closed on an infrastructure bill,” noted Dyer. “I just don’t know if they are there politically do this. I think the most common sense thing to do is try to depoliticize (the debt ceiling) because it is a matter of the nation’s economic interests.”
Of course, the downside of hooking a debt ceiling hike to an infrastructure bill is that voters could interpret the increase as justification for massive spending. That is a substantial political risk. But, it’s unclear at this stage what levers lawmakers have to deal with the debt ceiling.
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So, if you work in Washington, try to ignore foreboding news about the delta variant of COVID-19. Go celebrate Independence Day. Take advantage of restaurants and bars opening back up. Take in a ballgame.
But, be wary of August. A debt ceiling debacle could threaten the vaunted, congressional “August recess.”
Take it from Dr. Doom. July and August could get messy.
There’s a reason I took my vacation in June.
