Thursday, March 26, 2015

You Can't Fix This Stupid Law

by Neil H. Buchanan

In my new Verdict column, published today, I continue a discussion that I began two weeks ago in a Verdict column and its associated Dorf on Law post.  In those earlier pieces, I discussed whether the debt ceiling statute, and the constant threat of a constitutional violation that the mere existence of the debt ceiling creates, requires a president to engage in executive actions designed to delay as long as possible a potential drop-dead date.  The politically salient part of the analysis was that those executive actions would most definitely include large increases in tax collections, which is hardly what the Republicans who love to use the debt ceiling for bargaining leverage would find appealing.

Today's Verdict column begins by noting the various ways in which a president would be compelled to act, if he wished to avoid being guilty of failure to prevent a default or other constitutional violation.  The new, main point of the column is that these executive actions are not merely politically unappealing to the party of "no new taxes," but that they would remove an important aspect of modern legislating, an aspect on which both parties have long relied: regulatory gap filling.  Congress, for good reasons and bad, finds it difficult or impossible to anticipate every possible situation that could arise under a law, which leads it to write laws in a way that the executive branch can later interpret via regulatory guidance (and, inevitably, prosecutorial discretion).

All such executive actions, however, have revenue and spending implications.  If the president must avoid/delay a debt ceiling crisis by doing everything possible to spend the minimum and collect the maximum dollars authorized by Congress's laws, then he has effectively lost the discretion that Congress otherwise would seem to have bestowed upon him.  Every executive action, under this line of thinking, would need to be deficit-minimizing, even if doing so were wholly inconsistent with congressional intent or simply good policy making.

Of course, one way for Congress to avoid these unintended consequences would be to stop writing laws that grant executive discretion in the first place.  In some circumstances, I think that would be a good idea.  For example, the Dodd-Frank financial reform act left far too many aspects of the law to be filled in by executive rule-making, an arena in which Wall Street has far too much influence.  More than four years later, there are still important regulations under that law that have not been promulgated.  Even so, there is nothing in the Dodd-Frank experience that says that it is generally desirable -- or even possible -- for Congress to write laws in a way that calls for no further executive discretionary actions.

But the other way for Congress to ensure that the debt ceiling statute does not create perverse results and unintended consequences is ... wait for it! ... to repeal the law.  To paraphrase Chief Justice Roberts: "The way to stop having debt ceiling crises is to stop having a debt ceiling."  In today's Verdict column, I argue that there is nothing good about the debt ceiling, responding to those who claim that the statute has been a "useful" way to focus Congress's attention on deficit and debt issues.  My argument there was that the downside risk is simply too horrific to justify whatever mind-focusing benefits debt ceiling standoffs might provide, especially because the annual budgeting process already gives Congress ongoing opportunities to achieve whatever changes in fiscal policy that it wishes to achieve.

The next step of the analysis, however, would be to ask whether there are ways to "mend, not end" the debt ceiling that would somehow preserve the purportedly good things about the debt ceiling without threatening global economic collapse.  As it happens, one of the many astroturf deficit-scold groups has used the recent return of the debt ceiling to propose various ways to change the debt ceiling, so that it could help the world fight the oh-so-awful deficit/debt situation in the United States.  Because this group is indistinguishable from any of the other astroturf deficit-scold groups that litter the DC landscape, I will not use its official name here.  Instead, I will simply refer to it as the GDHC, for Generic Deficit Hyperventilation Committee.

Most of these groups, and certainly the GDHC, are directly or indirectly funded by one obsessed billionaire, who has spent years and millions of dollars sowing deficit panic to justify attacks on Social Security and Medicare.  That these groups insist on ignoring reality about the U.S. fiscal situation, and in particular that they reflexively reject all good news on the subject, is a symptom of that obsession.  But I digress.

Notwithstanding the GDHC's obvious bad faith, I have to give them credit for acknowledging just how bad it has been for Republicans to threaten default via debt ceiling showdowns.  The problem is that they seem to think that it is possible to fix an unfixable law.  What is especially interesting about their list of proposed fixes is that each of them either relocates the same problem to a different, but equally damaging point, or they amount to implicit repeal of the debt ceiling.

On the latter point, consider the suggestion to "[i]ncorporate the debt limit into Congress’s fiscal decision making," which they suggest can be achieved in three different ways. Yet each of those suggestions -- "Automatically increase the debt limit upon passage of budget resolution," "Require reconciliation instructions to increase the debt limit to accommodate debt levels in the budget resolution," and "Require legislation with significant net costs to include an increase in the debt limit" -- are merely variations on the so-called Gephardt Rule, which simply negated the debt ceiling statute by making the limit comport with the borrowing implied each time that Congress enacted spending and taxing laws.

The other suggestions, whatever their other merits, simply miss the mark.  For example, GDHC suggests that the debt ceiling be tied to "more meaningful economic measures" by either "[s]ubject[ing] debt held by public instead of gross debt to the debt limit," or "[i]ndex[ing] the debt limit to GDP growth, effectively capping debt-to-GDP."  Although I have frequently commented on the particular absurdity of using gross debt as the target in the debt ceiling statute, neither of these solutions solves the real problem.  Even if the ceiling were set as a matter of debt-to-GDP, there will still be times when that limit would be reached.  In fact, if we were at that limit when any kind of adverse fiscal shock happened along, the legally required result would be to engage in measures that would make the economic downturn worse.

Easily the worst idea, however, is to "[a]pply the debt limit to future liabilities and unfunded obligations."  Last year, in a series of posts here on Dorf on Law (last post here, with links to the earlier posts therein), I noted the craziness involved in so-called Generational Accounting.  Even if one were to disagree with some of my particular critiques of that infinite-future-term accounting method, we know for sure that the state of the art in long-term forecasting is nowhere near good enough to provide a meaningful guess about future liabilities and unfunded obligations.  In fact, the guesstimates offered by proponents of that method of accounting jump around constantly, changing by trillions of dollars in response to changes in various assumptions about economic variables.

Perhaps the most generous thing that one can say about the GDHC's list is that they could be providing a fig leaf to allow Republicans to back away from the debt ceiling law without admitting that they are doing so.  There will surely never come a day when Republicans in Congress agree simply to repeal the debt ceiling, but maybe if the Gephardt Rule is renamed the "new-and-improved end of debt for the good of future generations debt limit statute," then maybe they will vote for it.  Based on the GDHC's track record (and that of its sibling organizations), however, I doubt that they are thinking about it in that way.

In any event, nothing on the GDHC's list suggests that there is a good version of a debt ceiling statute, or even a better version.  The only good things on their list are tantamount to repeal.  Which is precisely the point.

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