Congratulations, America, you’ve hit the debt ceiling again!
Starting Friday, the government will need to use emergency measures to keep paying its bills, as a congressional measure that suspended the legal borrowing limit expires Feb. 7. But that won’t hold the country over for very long, and we’ll start running the risk of default within about three weeks’ time.
Why risk putting America’s creditworthiness on the line again, just when the economy is beginning to pick up some steam? Because Republicans have decided once more that they want something—anything—in return for raising the country’s legal borrowing limit.
What? Well, they’re not entirely sure. In fact, House Republicans left town on Thursday without even making up their minds.
The purported rationale for negotiating over the debt ceiling is that it’s a useful check on runaway government spending. House GOP Leader Eric Cantor said so himself last weekend.
“I’m hopeful that the president and the Senate will work with us in the House to actually do what has typically been done with debt ceilings, which is making some progress toward addressing the spending problem in Washington, making some progress toward trying to grow the economy around the debt ceiling,” he said Sunday on CBS’ Face the Nation.
But if the end goal is lower spending and greater fiscal responsibilty, the House GOP’s latest search for a debt-ceiling bargaining chip suggests otherwise.
One early Republican idea was to tie the debt ceiling to repealing Obamacare’s “risk corridor” payments to health insurers—a safety valve in case not enough young, healthy people sign up, which the GOP has dubbed an “insurance company bailout.” Then the Congressional Budget Office pointed out the risk corridors will actually save the government $8 billion between 2015 and 2017, since insurers have to pay into the program as well. So repealing them, as the GOP proposed, would actually increase the deficit.
Republicans went back to the drawing board and came up with another idea: Let’s insist that the debt ceiling be tied to reversing military pension cuts that Congress put into effect by a wide, bipartisan margin just a few weeks earlier. Since nobody wants to look like they’re hurting veterans, the thinking goes, the proposal will be hard for Democrats to dismiss out of hand.
But it turns out that reversing cuts runs into that same pesky logic problem: It would increase spending to the tune of $6 billion over the next 10 years. In fact, the whole reason Republican leaders had approved the cuts in the first place was that they made “real changes to these autopilot programs that are the real drivers of our debt,” as Rep. Paul Ryan declared in December.
Pressed on the issue, the House GOP quickly assured reporters that they would offset the reversal of the military pension cuts, then they scrambled to find a pay-for. Politico reported that what they came up with on Thursday was an unrelated reform measure called “pension smoothing,” which conveniently saves exactly $6 billion. (Never mind that Senate Democrats have proposed using the same pension-smoothing offset to pay for unemployment benefits, effectively pitting the jobless against military vets.)
With this offset for military pension hikes, the new GOP plan wouldn’t actually increase the deficit — but it wouldn’t do anything to reduce it, either. On fiscal grounds, it would be a wash, doing nothing to advance the Republicans’ supposed rationale for negotiating over the debt ceiling to begin with—to rein in runaway government spending. All this suggests that Republicans have given up any semblance of a debt-ceiling fight rooted in any principled commitment to “addressing the spending problem in Washington,” as Cantor promised. Instead, they see the debt ceiling as a simply another chance to exert some political leverage over Democrats. As Rep. Martin Stuzman memorably declared during the shutdown: “We have to get something out of this. And I don’t know what that even is.” There are signs that Republicans have already half-thrown in the towel, with some of the most conservative legislators admiting that the “theater” will invariably preface a clean debt-limit vote, something Democrats have demanded all along. The Republicans, in fact, have already shown this fight has devolved into a farce: They voted twice last year to “suspend” the borrowing limit to avoid technically “raising” it, but it was really just a political fig leaf that effectively did the same thing. Having just passed a $1 trillion budget without much protest, the House GOP is expected to fold again. But even if it’s losing steam, the GOP’s ongoing Kabuki theater over the debt ceiling continues to come at a cost. And it’s ordinary, tax-paying Americans who are paying the price. The 2011 debt-ceiling fight alone raised Treasury’s borrowing costs by $1.3 billion, hurting business and consumer confidences, stocks, and mortgage spreads. The markets are mostly ignoring the issue for now, but the rumblings of another stand-off have already started raising our borrowing costs in recent days. Good times.
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