Deciphering Congress’s Machinations on the Debt Limit

David Super

     Once upon a time, when the Executive Branch routinely disregarded the Appropriations Clause to spend federal funds without Congress’s clear endorsement, a statutory cap on the amount of debt the federal government could incur might have seemed like a laudable reform.  It was a fallback meant to reassert some degree of congressional control, at least in the aggregate. 

     Since then, a host of more nuanced and effective budget process reforms have returned the power of the purse resolutely to Congress.  Yet the debt limit shambles on, periodically appearing at the gates of our national village to sow fear and consternation among the populace. 

     This year has seen one of those unfortunate visits.  The Treasury announced that by August it would reach the limit of its “extraordinary measures”, accounting gimmicks that effectively borrow money from government-controlled funds without it appearing as formal debt.  (At this point, with these same moves, routinely made on the eve of every single debt limit crisis, are not especially “extraordinary”, although they are modestly disruptive.) 

     On prior occasions when the nation has approached the debt limit, the two parties’ strategies have been remarkably asymmetrical.  When Republicans controlled the presidency, they quietly put forward measures to suspend the debt limit for some period of time, and Democrats went along.  This was true, for example, when the highly partisan 2017 upper-income tax cut legislation necessitated an increase in the debt limit under President Trump.  Democrats’ acquiescence was not so much meekness as a bow to reality:  nobody was going to believe that Democrats would vote down an increase in the debt limit and throw the country into economic chaos, so they would have no leverage anyway.  Sanity has its burdens. 

     By contrast, when a Democrat has been in the White House, Republicans have insisted that their votes to raise the debt limit could only be purchased for substantial concessions on the nation’s fiscal agenda.  This certainly is not “deficit hawkishness”:  not only do they steadfastly refuse to put revenue increases on the table to reduce the deficit, but they continue to pursue large, unfunded tax cuts targeted on the affluent.  Nonetheless, Republicans sufficiently convinced President Obama that they would take the economy over the brink that he agreed to lock in stringent austerity for a decade. 

     Several factors produced the deficits necessitating this summer’s debt limit increase:  partisan legislation from Republicans (the 2017 tax cuts) and the Democrats (this spring’s American Rescue Plan Act), the extensive bipartisan coronavirus relief legislation, and the pandemic-induced recession.  Yet despite the lack of clear Democratic responsibility for needing to raise the debt limit, some Republicans insisted that they could reprise their 2011 strategy and extract major substantive advances.  Democrats wisely refused to consider concessions for Members of Congress merely doing their duty to uphold the full faith and credit of the United States. 

     Senate Minority Leader McConnell came under strong public and private pressure from major Republican donors.  He recognized that, particularly in the wake of President Trump’s partial government shutdown in search of border wall funding, his party would bear the blame for any economic calamity.  He found a middle path between Republican firebrands and his donors:  he repeatedly insisted that the debt limit would be raised but that Democrats would have to do so entirely with their own votes. 

     Senator McConnell soon made clear that he was suggesting that Democrats raise the debt limit through budget reconciliation procedures.  Debt limit increases, along with changes in entitlement spending and changes in revenues, are one of three types of initiatives for which the Congressional Budget Act makes reconciliation available.  Such a bill would be immune to Republican filibusters, but it would come at a significant political price.  First, Democrats would have to bring a revised budget resolution to the Senate floor, allowing Republicans to hold a “vote-a-rama” that forced Democrats to vote against numerous politically appealing amendments.  Then Democrats would have to bring a reconciliation bill to the floor to actually raise the debt limit, allowing Republicans to force another “vote-a-rama.”  Third, the majority party may only invoke reconciliation to raise the debt limit by a stated dollar amount; resort to reconciliation would preclude the more demure path of suspending the debt limit for some period of time.  And finally, both the budget resolution and the reconciliation bill would occupy a significant amount of Senate floor time, crowding out confirmations of President Biden’s appointees (many of which Republicans have sought to block) and other Democratic priorities. 

     Senate Majority Leader Schumer refused to start down the reconciliation path, insisting that it was unnecessary as Republicans could and should support ordinary legislation to raise the debt limit.  As the deadline neared, Senator Schumer also argued, by then correctly, that the Senate no longer could complete all necessary steps in time.  At the last minute, Senator McConnell agreed to provide the votes for an increase in the debt limit to last until early December, about the same time as the expiration of the continuing resolution funding the government in the absence of regular appropriations bills.  Many in his caucus bitterly criticized Senator McConnell’s agreement to this approach, and most observers believed that, with President Trump bitterly opposed to any cooperation with Democrats, Senator McConnell could not muster the votes to replicate this maneuver in December. 

     Superficially, the choices for averting a default remained the same:  a Democratic-only reconciliation process, with all the bruising political costs it entailed, or Republicans allowing regular legislation to pass.  (Regular legislation would not inherently require any Republican votes to pass:  it would only require Republicans not to filibuster the legislation.  The insistence of several Republican senators on filibustering any debt limit increase, however, would have forced other Republicans to vote to cut off debate or see the legislation founder.) 

     Last week, Senators Schumer and McConnell arrived at an unusual compromise that splits the difference between these two extremes.  They inserted a special, one-time alteration to Senate rules into a must-pass bill to prevent automatic reductions in Medicare and agricultural programs.  Under this rule, Senator Schumer has the right to introduce a measure to raise the debt limit before the end of this year that will be immune from filibuster.  This measure may only raise the debt limit by a specified dollar amount; it may not suspend or postpone the debt limit’s effect.  This measure also may not contain a preamble or any other provisions to make Democrats’ case for passing it or providing other benefits to lessen its political sting.  Because it is immune to filibuster, the only vote would be on final passage, with only a simple majority required.  Republicans thus could all vote “no” with the assurance that Democrats’ votes would be sufficient to avert a crisis. 

     Some Republicans condemned Senator McConnell for “helping” the Democrats with this agreement.  In truth, it more-or-less splits the difference between the political costs of passing simple legislation and those of the Democrats having to raise the debt limit on a reconciliation bill.  Republicans succeed in forcing Democrats to raise the debt limit without any Republican votes, in denying the Democrats the ability to suspend or postpone the debt limit rather than voting for a particular number increase, and in preventing the Democrats from packaging the debt limit increase with any sweeteners.  Democrats succeed in averting two vote-a-ramas that would force them to cast numerous other politically embarrassing votes, further endangering their marginal senators, and avoid the huge loss of floor time that the reconciliation route would entail.  Both, of course, avoid further anger from financial interests nervous about the effect of a debt limit crisis on the nation’s economy. 

     It is hard to see either side having a reliable path to do any better.  By continuing to refuse to start the reconciliation process, Senator Schumer could effectively recreate the situation earlier this year in which too little time remained to do so.  At that point, however, if Senator McConnell could not dissuade his caucus from filibustering or secure ten Republican votes to shut down that filibuster, the country might have no way to avoid breaching the debt limit.  His donors likely would blame him for a failure of leadership and for his brinksmanship, but they have enough other reasons to support Republicans that the long-term harm might be negligible.  Whom voters would blame would be unclear:  Democrats could force Republicans to cast the votes precipitating the crisis, but independent voters (the only ones not hardwired to blame one party or the other) pay little attention to the details of what is happening in Washington and blame whichever party is nominally in the majority.  In any event, a default likely would have its most immediate impact on low- and moderate-income people lacking the reserves to weather an economic disruption. 

     @DavidASuper1