Why the GOP Can’t Play Games with the US Debt Ceiling
Have you ever had this nightmare? You are behind the wheel of a 1962 Thunderbird hot-rod in a game of “chicken” on a dark street. You are confident because you know the other driver well and you know he has “no nerve,” and is certain to swerve if you stay resolute. But when the oncoming car gets close enough to see inside, you are shocked that you do not see the driver you were sure you could intimidate. The oncoming driver is a stranger, perhaps not even human, a robot, or a crash test dummy. What can you do to avoid death and disaster?
Republicans lived this nightmare in 2011. They thought they could intimidate President Barack Obama and the Democrats in a game of chicken over the national debt limit, and they even won some concessions in the form of spending cuts, but in August they learned Obama was not the driver behind the wheel, they were playing chicken with the bond market and the credit rating agencies, who were not intimidated. Standard and Poor’s downgraded US Federal Reserve Notes from AAA to AA+, and the Dow Jones Industrial Average dropped 635 points (back when 635 points was front page news).
Republicans backed down the next day and allowed the debt ceiling to be pushed into 2013 in a deal that prolonged the budget conflict for a few months, that turned into a few years. The game of chicken was replaced with a game of kick-the-can as a Super-committee failed to resolve the budget impasse, and government was funded by a series of stop-gap measures passed in the last hour before the deadline, and Obama won reelection.
The reversal on the debt limit fight cost the House Republicans half of their bargaining leverage, and they lost the other half when a government shutdown started on October 1, 2013, lasted 16 days. House Speaker John Boehner (R-OH), House Majority Whip Kevin McCarthy (R-CA), and the “Tea Party” Republicans had made the same miscalculations Speaker Newt Gingrich (R-GA) made in November and December of 1995 into January 1996 with two government shutdowns totaling 26 days.
Despite well-crafted GOP talking points to the contrary, the American public wants to keep the government open, and they blame the side that is seeking budget bargaining leverage by closing the doors of the passport office and national parks. The same lesson was learned a third time when President Donald Trump caused a shutdown lasting 35 days starting at the end of 2018 and extending into 2019. He eventually caved in with his poll numbers plummeting and no new funding for his southern border wall.
There are many similarities between the distribution of power in Washington in 2011 and 2023, but there are many important differences between then and now, and they all push in the direction of understanding that Republicans are now in a far weaker position to attach demands to a debt ceiling increase. Republicans gained 63 seats in the 2010 “shellacking” to win the House Majority by 49 seats. The “Red Trickle” delivered a 9-seat GOP gain in November for a 3-4 seat majority depending on whether we expect the so-called “Congressman” who most recently has been giving his name as “George Santos” to last long enough to cast votes when they matter in the summer months. Washington observers should pay less attention to what the House Republicans say they want to do and more attention to what House Republicans actually have the power to do. There is very little power is such a closely divided House, unless Republicans can stay as unified behind McCarthy as Democrats were in support of former Speaker Nancy Pelosi (D-CA).
The biggest difference between then and now is that we have seen this game before and many of the key players learned lessons from the way it ended. Any spending cut concessions from the White House will be seen as evidence that the hardball demands are succeeding, so the White House is right to refuse to negotiate with House Republicans over the debt ceiling. The White House cannot avoid engaging with Republicans, mostly in the Senate, over the FY2024 budget, but the FY2023 budget passed in the “lame-duck” congressional session ending 2023 with a minimum of rancor.
The real power in Washington can be found in the bipartisan Senate supermajority that has been ruling Washington for the past two years. Any common-ground agreement among Majority Leader Chuck Schumer (D-NY), Minority Leader Mitch McConnell (R-KY), and Senator Bernie Sanders (DS-VT), can pass the Senate with a filibuster-proof majority. They will soon agree to a clean debt limit extension and send it to the House where it will sit until either just before, or just after, the financial markets force Republicans to act.
For these reasons the White House is correct to refuse to negotiate over the debt ceiling, unless the Biden Administration wants to use the must-pass debt limit increase to gain its own leverage in discussions toward putting the nation’s long-term deficit and debt trajectory on a sustainable path with a balanced package of reductions in the rate of spending increases and additional tax revenue, but this will be the topic for our next post.