As the Debt Ceiling Crisis Looms, Republicans Resort to a Gimmick
As the Debt Ceiling Crisis Looms, Republicans Resort to a Gimmick
The GOP’s spending prioritization bill won’t work, practically or politically.
House Republicans are in a tough spot. They realized only after picking a fight with President Joe Biden over raising the debt limit that they lack a plan for winning it, and that coming up with one will be difficult with their thin majority and internal divisions.
Now some in the party think they have identified a helpful tactic in a revised version of a bill that, when borrowing is constrained, prioritizes some broad categories of spending accounts over others. The hope is that passing such a bill will deliver a kind of political victory, or, if not that, at least allow the party to fight to a draw with the president.
It won’t work. Even a casual review of what the prioritization bill calls for reveals that is too flawed to be taken seriously.
No, having picked this fight over undisciplined spending, the only way forward for the GOP is to demonstrate more discipline—by identifying a short list of actual cuts that it and the general public would support. Short of that, Republicans in the House are headed for an inevitable retreat.
These matters are getting renewed attention as another debt limit showdown approaches. After Congress raised the borrowing cap by $2.5 trillion in December 2021, the limit now stands at $31.4 trillion, which the federal government reached earlier this year.
To buy time, Treasury Secretary Janet Yellen announced in January that she would follow the lead of her predecessors and deploy “extraordinary measures” to hoard cash for paying incoming bills. These steps postpone the investment of some receipts into Treasury securities owned by government funds, which frees up the money for meeting contractual obligations. When the crisis passes, the Treasury will fully restore the affected funds to the positions they would have been in if the extraordinary measures had not been invoked.
While Yellen can postpone a reckoning, she can’t do so indefinitely. The Bipartisan Policy Center currently estimates that the Treasury will run through the maneuvering room that the extraordinary measures provide in late summer or early fall. In other words, that is when a default could occur if Congress does not pass a law raising the statutory limit.
Prioritizing some federal obligations when borrowing is barred is not a new concept. In 2013, and again in 2015, House Republicans embraced it as a way to duck responsibility for raising the debt limit. The idea was to show voters that they were working to minimize the consequences of a default without being forced into voting for more borrowing. Their supposed solution was to use incoming revenue and a limited authority to issue new debt to pay some bills (most especially the costs associated with servicing existing debt) but not others (such as the bills associated with running scores of domestic programs).
In 2015, the GOP pushed a bill through the House to enshrine prioritization into law. It would have required the secretary of the Treasury to auction new federal debt instruments as needed to replace maturing securities, and to make interest payments to current debtholders before meeting other obligations. Further, it would have placed Social Security in the same preferred position as nongovernmental holders of federal debt, with the secretary required to borrow as needed to ensure the program’s trust funds could pay full benefits and also receive interest on invested reserves. The government also would have been barred from paying the salaries of members of Congress while debt was constrained by the borrowing limit.
The Senate never considered the House-passed measure, and it was not a major factor in the eventual passage of a debt limit measure.
Yet some House Republicans hope modifications to the 2015 bill will deliver better results this time around. The updated bill, recently approved by the Republican majority on the House Ways and Means Committee, attempts a more elaborate ordering of accounts from highest to lowest priority tiers. In the event that the debt limit is reached (and extraordinary measures exhausted), Treasury would be directed to service existing debt, protect Social Security and Medicare, and then also use whatever funds are left to meet the obligations of the Departments of Defense and Veterans Affairs. The last bills to be paid would be the salaries of government employee union representatives, the travel expenses of the executive branch, and the salaries of federal workers and members of Congress.
It is doubtful that this bill will gain traction. As others have noted, even without a new law, the Treasury Department can prioritize debt rollover and net interest payments in the event a limit on borrowing starts to pinch.
That will be small comfort, though, when the gulf between incoming revenue and the amount owed by the government widens to more than a $100 billion each month. According to the Congressional Budget Office (CBO), the full-year deficit that begins on October 1 is expected to be $1.6 trillion. If net interest payments, Social Security, Medicare, Defense, and Veterans Affairs are all protected, the rest of the government’s activities would have to be cut by about 75 percent to stay within the current borrowing limit.
To state the obvious, sustaining such reductions would be politically impossible even if Republicans were fully in charge.
It is also not feasible administratively to make distinctions among the many millions of checks going out each month. The Treasury’s bill-paying operation is geared toward efficiency, not refined distinctions among payment recipients. Moreover, even if all sides agreed that prioritization of some accounts over others was a good idea (which they won’t), it would take beyond the timeframe of the current crisis to build such a capacity.
The GOP would be better off constructing a more traditional starting offer for the coming negotiations. The Republicans complain with some justification that both parties abandoned spending discipline during the pandemic. Domestic appropriation spending is expected to reach $941 billion in 2023, a jump of more than 40 percent over the level of expenditures in 2019. GOP leaders could bring to the negotiating table cuts to some of the accounts that have grown the most over these years. House Speaker Kevin McCarthy’s most recent letter to the president on his push for debt limit negotiations provides a first step in this more promising direction, although his list of targets for savings is still too general.
McCarthy’s position would be strengthened substantially if the House could pass some serious spending reductions as a demonstration of the party’s commitment to changing course on the budget. The president would then be forced to either counter with cuts of his own, or with tax hikes. Either way, Republicans would have shown that they are serious, and voters would notice.
They will also notice if the GOP pins its hopes on a plainly unserious gimmick like the current prioritization bill. If that is the all that Republican leaders can come up with, it will only be a matter of time before they are forced to accept a debt limit increase that contains no evidence that they took control of the House in January.