Monday morning, March 16, 2015, America steps through a peculiar looking-glass: just yesterday, our Treasury could offer new public debt in order to make up for the shortfall in tax revenues relative to obligated spending, but today it cannot. After having taken a thirteen month holiday, courtesy of a February 2014 agreement to suspend it, the debt ceiling is back—set at exactly the levels of debt we have today, somewhere north of $18 trillion. With our heads against the ceiling, for the next few months (perhaps all the way into the fall) we will be funding government expenditures by the seat of our collective pants. That is manageable, and there is no reason to expect the debt ceiling’s return to bring any catastrophe—but neither is there any reason to think that the debt ceiling will do anything useful for our fiscal situation or even for our national discourse around the issue. Instead, the debt ceiling will most likely go back to being a terrible distraction from the important business of thinking about our nation’s fiscal future.
To understand the basic fruitlessness of making the debt ceiling the centerpiece of any fiscal negotiations, our political memories need to extend back farther than 2011. In that year, Republicans dug in their heels and won what they considered to be an important partial victory under the shadow of a debt ceiling-driven default. But that isn’t our only data point. Arguably, it was mixing the debt ceiling into the negotiations around the government shutdown in October 2013 that forced the Republicans to accept ignominious total defeat then. The same can be said about the previous instance in which the debt ceiling played a prominent role in a fiscal fight, in 1995-96. In that episode, Republicans thought they could force President Clinton to accede to their demands by attaching them to a debt ceiling increase, but Clinton had the fortitude to veto these and stare them down. His Treasury Secretary, Robert Rubin, devised a series of extraordinary measures, including messing around with the funding of the Social Security Trust fund (since explicitly banned by statute), and earned some furious impeachment threats in the process, but ultimately meant that the executive branch could outmaneuver and outlast the legislature in those negotiations. The lesson learned by Speaker Newt Gingrich was an extremely clear one: that the debt ceiling is a “dead loser” for Congress. Go farther back and you find more fruitless disruptions, if usually lower profile.
This shouldn’t come as a surprise. As I have previously argued, the debt ceiling acts like a roach motel for fiscal conservatives: they can come in to make big speeches, but they cannot leave until they have capitulated to as clean a raise as the President decides to demand. If those speeches are the whole point, and members of Congress just want the soapbox—well, that’s not disastrous, and indeed that’s the role that the debt ceiling has played for most of its history. But frankly we need action on our long-term fiscal problems rather than just words. Making hard choices in the budget process and hammering out sustainable bipartisan political compromise is where people should be directing their energy, notwithstanding a recent wave of snarky dismissals of grand bargaineering. Other than an extremely cheap rhetorical advantage, it’s hard to imagine what anyone hopes that arguing about the debt ceiling can reasonably be expected to yield.
As we think about the debt ceiling and the associated endgame, it’s also natural for us to get our arms around the very difficult question of what would happen if, for some awful reason, negotiations really did break down and the Treasury’s options were exhausted. That would be, very simply, a constitutional crisis. In a talk this past November, I tried to work out how the President could attempt to turn the situation into a “hiccup” rather than a massive blowup. I will be formally writing up my remarks in the future, but for now they are available for viewing here (starting around 46:00, though the whole event is well worth watching). Let us hope they never become terribly relevant.