Thursday, December 13, 2012

What Are They Thinking? Trying to Imagine What the Republicans' Strategies in the Debt Ceiling Debate Could Possibly Be Meant to Accomplish

-- Posted by Neil H. Buchanan

I have again been writing a lot about the debt ceiling lately.  (My most recent Dorf on Law post can be found here.)  When it became clear that Republicans had dealt themselves a bad hand in the post-election debate about the federal budget, they decided to threaten again to put the country into default.  If Obama does not give them more spending cuts, they vow, they will refuse to increase the debt ceiling.  Come February, with the last accounting maneuvers by the Treasury exhausted, the full faith and credit of the U.S. federal government will be in the toilet, and economies worldwide will swoon.

Professor Dorf and I, having taken seriously Republicans' announcements last year that this kind of hostage-taking was to be their standard operating procedure going forward, wrote an article this Fall in Columbia Law Review, arguing that the Republicans' strategy is not only terrible policy, but it should not have the effect that they intend.  The assumption has been that the President will (if the Republicans carry through on their threats) be forced to make spending cuts, because there will not be enough money coming in on a daily basis from taxes, and the debt ceiling will prevent him from raising any further funds by issuing Treasury bonds.  Lacking the money to pay for things, he would have no choice but to start cutting spending.

Regular readers of this blog now know (all too well, I suspect) that we argued in our article that the President's most prudent, modest, and least unconstitutional course would instead be to issue debt in excess of the debt ceiling, in order to pay all bills coming due (and without raising taxes pursuant to the President's sole authority).  Unfortunately, although there are two separate constitutional arguments supporting this conclusion, one of those arguments has gotten a bad rap as being "too weird," or something, which has ended up tainting both arguemnts.  That argument, based on Section 4 of the 14th Amendment, was rejected out of hand last week by the President's Press Secretary, Jay Carney.  He said nothing about the second argument, the "trilemma," perhaps because he does not read Columbia Law Review, and perhaps because that argument is not otherwise in wide circulation.   (The argument apparently originated with us, having emerged from our discussions during and after my on-line exchange with Larry Tribe in July 2011).

Right before Carney dismissed the 14th Amendment argument, Professor Dorf and I had written an op-ed, which was under consideration by a major national newspaper.  The editors indicated that they were very interested in the piece, but they lost interest as soon as Carney spoke.  We pointed out that nothing he said was actually relevant to our argument, but to no avail.

We then did what all good academics would do: We decided to write a longer piece.  (Think of it as the scholarly equivalent of an American speaking louder to someone who does not understand English.)  Making good use of the trend among law reviews to publish on-line supplements containing timely essays in a shorter format (by law review standards), we are writing a follow-up essay for Columbia's Sidebar.  We expect the essay to come out next week.

Naturally, much of that essay went over now-familiar territory: explaining what the trilemma means, describing why cutting spending is constitutionally problematic, and so on.  As I was working on the initial draft, however, I found myself confronting a question that I had never directly confronted before: If one were to give the Republicans the benefit of the doubt, and thus to assume that they are trying to accomplish some coherent policy goal in the debt ceiling debate, what sense could one make of their specific strategy in that debate?  As it turns out, their known belief that "government spending is bad" -- as incoherent as that is, on oh-so-many levels -- cannot explain what they are doing. 

Here is what I wrote: "[If the Republicans refuse to increase the debt ceiling,] the president would in each case be forced to choose between inflicting severe and immediate austerity on the country at the moment the ceiling was reached – making spending cuts adequate to reduce total spending, so that it would match the tax revenues flowing into the Treasury – or accepting less severe austerity in the immediate term, by agreeing to cut spending by larger amounts in the future, as the 'price' of allowing borrowing to rise in the immediate term, with concomitantly smaller spending cuts up front." 

That description, I think, captures what the Republicans seem to be trying to accomplish strategically.  They know that the President will not want to inflict harsh austerity through spending cuts today, so they will allow him to do less of that now, if he agrees to do more of it later.  This might explain, for example, House Speaker Boehner's statements that the Republicans will insist on two dollars of long-term spending cuts in return for each one-dollar increase in the debt ceiling next year.  More austerity later, in return for less austerity now.

That might be a decent reading of what the Republicans think Obama cares about, but is it their best path to getting what they seem to want?  They believe -- or at least, they say they believe -- that there should be no national debt at all.  They also claim to believe that austerity is good for the economy.  If so, then why would they even give Obama and the Democrats the option to avoid cuts in spending now, in return for any amounts of spending cuts in the future?  Republicans can also guarantee further spending cuts in the future by continually refusing to increase the debt ceiling (and by continuing their efforts to cut taxes and "starve the beast").

If the idea is to dangle temporary relief in front of Democrats, why not suggest that they will indulge Democrats' foolish belief in Keynesian economics (by which, at the very minimum, short-term spending cuts cause temporary recessions), and thus to increase the debt ceiling in February, only in return for a decrease in the debt ceiling in future years?  They could say, "Well, we'll push it up from $16.4 trillion to, say, $18 trillion next year, but in a bill that also specifies that the ceiling will be reduced by $1 trillion per year through the end of 2031."

Or, to push the point even further, why not take up an idea that I mentioned last summer, by which Republicans hold the debt ceiling hostage to non-budgetary matters?  Overturning Roe v. Wade, passing a constitutional amendment banning same sex marriage, banning taxation of corporations and the rich?  Why not?

One might object, of course, that politics is the art of the possible.  Even with a radical agenda, Republicans understand that they cannot get everything they want from Democrats, even if the Democrats want something badly in return.  That old saw, however, is inapt here, because the Republicans really, really think that the President will have no choice but to cut spending if the debt ceiling is not increased -- and Obama and most Democrats really, really seem to agree.  If so, and if the other side really believes the entire global economy is at stake, why not push one's advantage?

The Republicans might, however, think that the Democrats could actually end up agreeing with them.  Some Republicans have argued, after all, that all of the talk about a global financial crisis is nonsense, that the government could cover its debt payments for years, and that Democrats are merely fear-mongering in suggesting that the full faith and credit of the United States is on the line.  If Democrats came to believe that, too, then many of them might not view the threat of default as a serious matter.  We could just hit the ceiling, stay there (while Obama deals with the remainder of that fiscal year's spending cuts), and pass balanced budgets thereafter.  There could be big battles over the distribution of spending within those budgets, but with neither Keynesian concerns nor default worries to weigh them down, Democrats might just learn to stop worrying and love the debt ceiling.

If that happened, then Republicans would have gotten something that they claim truly to desire: Balanced budgets forevermore.  If that were to happen, however, they could not continue to force what they really want, which is spending cuts.  (As a percentage of GDP, spending would go down, of course.  But there is no evidence that Republicans view things in those terms.  Nor could we be sure that GDP would continue to rise!)  Therefore, they use Democrats' fears -- about recessions and hurting poor people, and stuff like that -- to try to affirmatively harm those who benefit from social spending, and especially those who will rely on social spending in the future.

I am not saying that there is reason to believe that the Republicans are actually thinking along any of these lines.  As I have argued before, this is a party that has been taken over by leaders who show all indications of being sociopaths -- not just willing, but eager, to cut spending for childhood nutrition programs, for example.  Their reasoning seems to begin and end with "government bad!"  Even in that bankrupt mindset, however, it is difficult to see why they do not press their advantage further.  It is surely not because they think that Professor Dorf and I are right about the trilemma.  Is it? 


The Dismal Political Economist said...

The articles on this Forum about the debt ceiling and strategies to deal with it are very good examples of the situation where the proponents of a position are both correct and wrong at the same time.

First of all that this is an issue at this time is the result of political naïveté on the part of the President and horrendous mistakes he made during his first term. One of those mistakes was not to make permanent the Bush era tax cuts for middle income families in 2009 when he had the legislative ability to do so. A second mistake was his failure to understand the threat of the debt ceiling, at a news conference he famously indicated he didn’t even understand that it was a threat. And of course his third mistake was negotiating on it in 2011 instead of insisting on a clean bill raising the debt ceiling. This gave the impression, which still exists, that the President can be pressured.

The solution of the President issuing debt in excess of the ceiling is similar to the issue with the Supreme Court and President Roosevelt. Mr. Roosevelt had public opinion on his side with the New Deal programs, and public opinion on his side when the Supreme Court struck down many of those programs. But when President Roosevelt tried to pack the Supreme Court he was met with a storm of opposition. Politically Americans were not ready to take that step.

Similarly, today Americans are not ready to take the step of an Administration that borrows in excess of the debt ceiling. Doing so would turn a fiscal issue into a Constitutional issue, and the President would lose the political issue despite the fact that he would be Constitutionally correct.

The solution here is obvious. Follow the path that President Clinton took when Congress would not extend spending authority after the 1994 elections. That worked, the solution of ignoring the debt ceiling won’t.

tjchiang said...

Not to deny the contribution you and Professor Dorf in fleshing the argument in more detail, but I think the first person to make the argument based on the Take Care clause (which ultimately is where you hang your trilemma hat on) was Mark Tushnet at Balkinization.


Michael C. Dorf said...

TJ: I read Mark's post mainly as a criticism of the Section 4 argument, suggesting two backups: a) the Take-Care Clause; and b) the claim that the executive can force Congress to appropriate by violating the Constitution. We don't address b), and while we make a), we don't take credit for inventing it. We contend that our distinctive contribution--which we have repeatedly said emerged out of our fruitful back and forth with Larry Tribe--is the argument that anything the Prez does would violate the Take Care Clause and that the issue thus calls for choosing the least unconstitutional option. I think I was the first person to frame the issue that way, here:
But if someone else beat us to that point, please let me know, because I'd like to credit him or her.

tjchiang said...

Again, I do think the two of you made a contribution, but I think the essence of the argument--that anything the president might do would violate the Take Care clause--was implied in Tushnet's post. And Brad DeLong's post a couple of hours later made that explicit, I think.

Michael C. Dorf said...

Ah, good, thanks for that addition. Yes DeLong makes the point that the three duties are incompatible, and I'll credit him for that in future writing. BUT his argument is that therefore the President/Treasury Secy can simply choose to do whatever he wants, whereas our position--the core of our position in fact--is precisely the opposite: that the Pres/Treasury Secy don't get to make a naked choice. They have to choose the LEAST unconstitutional option.

tjchiang said...

Yes, I agree both that DeLong did not make that additional point, and that your least-unconstitutuional-option analysis is a better conclusion than saying that, once we are in unconstitutional-land anyway, the president can do whatever he wants. As an aside, though, I'm not convinced by your argument that unilaterally issuing more debt is the least unconstitutional option.