Wednesday, September 29, 2021

Debt Ceiling Brinksmanship

 by Michael C. Dorf

As regular readers of this blog will have inferred, on alternate Wednesdays I frequently use this space to write an essay that complements my bi-weekly column on Verdict. I shall follow that practice today, albeit with a somewhat tenuous connection to my latest column. However, before doing so, I'll to take the opportunity to call attention to two other just-published works of mine that, through the vagaries of publication schedules, give the false appearance that I've been writing around the clock in the last couple of days.

First, as Professor Buchanan explained yesterday, he, Professor Tribe, and I have an op-ed in the Boston Globe responding further to John Eastman's outrageous efforts to persuade former Vice President Mike Pence to facilitate Donald Trump's defiance of the 2020 election. We wrote it together because, as I noted last week, Eastman's already-infamous memorandum linked exactly one external source: a Verdict column that the three of us wrote a year ago.

Second, earlier this week, an academic paper of mine went live in the online version of the Florida Law Review. My paper responds to an argument presented in a (substantially longer) paper in the same journal authored by Professor Frederick Mark Gedicks, in which he offers an argument against what some originalists call the "fixation thesis"--the notion that a text's meaning is fixed at the time of its authorship. Gedicks argues that this thesis depends on an inaccurate understanding of how texts and audiences construct meaning. I suggest that the differences between Gedicks and those he critiques may not be important in practice and that, in any event, there are stronger grounds for criticizing originalism. I realize that I have not just now said enough for most readers to know exactly what Gedicks or I say in our respective papers, so perhaps if the firehose of constitutional crises lets up at some point in the next few weeks, I'll devote a separate post to it.

For now, I want to say a word about my latest Verdict column as an entry point for a thought on the looming debt ceiling crisis. The column poses the question whether it is hypocritical for the Democratic-controlled New York state legislature to gerrymander the state's congressional districts, given that Democrats have been loudly decrying such moves by Republicans in other states. I argue that it is sometimes but not always hypocritical to engage in a form of conduct one is simultaneously seeking to forbid. At least where the general prohibition would serve to solve a collective action problem, I say, the charge of hypocrisy is unfounded. And even if the charge has some truth to it, that doesn't warrant unilateral disarmament.

Speaking of hypocrisy, now let's talk about Congressional Republicans' current refusal to vote to support an increase in or suspension of the debt ceiling.

In a series of articles following the debt ceiling crises of the last decade, Professor Buchanan and I addressed the question of what the President ought to do in the event that Congress were to fail to raise, suspend, or repeal the debt ceiling before Treasury had exhausted so-called extraordinary measures to pay the government's bills. I won't recap those points here, because I want to focus now on Congress.

As Prof Buchanan and I have indicated from the very beginning, and as he reiterated in another Verdict column last week, the debt ceiling statute has always been completely unnecessary and should be repealed or, as he argues in his column, made subject once again to the "Gephardt rule," under which it is automatically adjusted when the gap between expenditures and revenue so requires. Even fiscal hawks can limit debt if they wish to limit debt by . . . wait for it . . . wait for it . . . not voting for appropriations that exceed revenues by more than the amount of debt they want to authorize.

Of course the weaponization of the debt ceiling a decade ago makes it more than an unnecessary statute. It is now a very dangerous statute. The near-miss last decade led to a downgrade of U.S. bonds. Another near miss could lead to a further downgrade. An actual default would be ruinous for the financial markets and before very long, for the real economy.

Is that what Republicans want? Some Freedom Caucus members might actually be sufficiently stupid or ignorant to think that failure to raise or suspend the debt ceiling is an exercise in fiscal rectitude, but the leaders of the Republicans in Congress are smart enough to know that a government default would be catastrophic for their Wall Street paymasters. Accordingly, as Prof Buchanan argued last week, Mitch McConnell doesn't want the government to default. Instead, he wants the debt ceiling to be increased or suspended with Democratic votes only so that: (a) the U.S. avoids default and thus pleases McConnell's Wall Street donors; while (b) enabling his fellow Republicans to run for office in 2022 on a platform that misleadingly portrays the Democrats as bankrupting the country to the mass of inattentive and uninformed voters.

The cynical hypocrisy is self-evident. Moreover, unlike NYS legislators voting for congressional gerrymandering despite opposing Republican gerrymandering, the congressional Republicans' inconsistency cannot plausibly be described as succumbing to a collective action problem, because there isn't one. Nevertheless, in the interest of a deeper dive, I want to see whether it might be possible to offer a plausible defense of at least one aspect of the current Republican posture.

In trying to explain the debt ceiling to the public, various news media outlets have often resorted to homey analogies. These are rarely perfect, because there are important differences between personal finance and the economics of a sovereign that can borrow money in its own currency. Nonetheless, the analogies are better than the bare Republican talking point of debt-means-excess-government-spending-is-socialism. Here's my effort to construct the home finance analogy, along with what I imagine is the best Republican response.

Suppose that roommates Deborah and Renee sign up for a cable package for the apartment they share, agreeing to split the cost. At the end of the first month, they get a bill for $80. Deborah writes a check for her $40 share but Renee refuses. "You are just an irresponsible spender," Renee says to Deborah, who responds: "what are you talking about? We agreed to get cable and we enjoyed it for a month. If you don't want it in the future, we can talk about that, but we have to pay the bill for what we already used."

That's a stylized version of the analogy, in which Deborah represents Democrats and Renee represents Republicans. Deborah is clearly in the right.

But now let's add a wrinkle that reflects the current Republicans' further talking point that they are unwilling to vote to increase the debt ceiling so long as Democrats are planning to allocate additional trillions of dollars for President Biden's "Build Back Better" (or human infrastructure) plan. In our roommate scenario, we might suppose Renee responds to Deborah as follows: "I'm not going to pay a cent for the cable bill so long as you persist in your plan to start mining Bitcoins in our apartment, thus driving our electricity bill through the roof." Deborah answers: "That has nothing to do with the cable bill, which we already owe."

Deborah has the better argument, but that doesn't mean that Renee's position is completely unreasonable. Given that Deborah's Bitcoin mining operation will implicate Renee as well as Deborah, we might think it's understandable for Renee to use whatever leverage she has--including threatening not to pay money she already owes for the cable bill--to try to stop Deborah. Accordingly, I'm willing to concede that I can imagine circumstances in which threatening not to pay money already owed is an understandable tactic to use to try to prevent a graver risk.

But that's all I'm willing to concede--and the concession doesn't go nearly far enough to justify the current Republican posture. Suppose Renee refuses to pay the rent, so that she courts a disastrous consequence, like eviction. That's closer to what Republicans are now doing.

Moreover, based on their prior actions and statements, it's pretty clear that the objection to the spending bill is opportunistic. Sure, most Republican members of Congress oppose spending money on such things as health, education, and combating climate change. But they would be withholding their votes from the debt ceiling increase--or, as they did during the Obama administration, trying to leverage it for their other priorities--regardless. Perhaps a better analogy would be if Renee refused to pay her share of the rent, full stop, or conditioned her rent payments on Deborah's agreement to do all the household chores.

So yes, it's possible to imagine circumstances in which a version of something that Republicans are saying might be justifiable. But the idea that Republicans are justified in withholding support for raising or suspending the debt ceiling to protest Democrats' possible spending plans is ultimately no more plausible than their contention that they are against raising the debt ceiling because they don't want to burden future generations with debt. It's hypocritical cynicism all the way down.

4 comments:

kotodama said...

It seems to me the home finance hypothetical doesn't account (no pun!) for one important factor. That is, between the two parties, there's no question Rs are the extremely financially irresponsible ones. Exhibit A being the endless tax cuts that always blow out the deficit. So Rs have absolutely no credibility when it comes to discussing matters of finance. As to how that could be worked in to the hypothetical specifically, I'm not sure. But it deserves mentioning somehow.

Unknown said...

If deficits don’t matter, how can deficit-creating tax cuts be irresponsible?

Joe said...

I would agree that "there's no question Rs are the extremely financially irresponsible ones" should be carefully included as a key factor there. I might not use that many strong qualifiers but the basic point is true.

The Republicans are also quite cynically pragmatic under McConnell so the blatant hypocrisy without the "no unilateral disarmament" aspect highlighted in the Verdict essay is also personally in character.

(I watched a historical movie recently and one criticism of a theory used as a key plot point was that it was not in character of the people involved.)

As usual, it's helpful Prof. Dorf takes the time to start from a ground that there is some credible argument & show why it doesn't hold up.

JS said...

I don't think the analogy works. Renee isn't holding up paying her share of the cable bill because Deborah wants to mine bitcoin. She's holding up paying to prevent Deborah from spending money hiring a plumber to fix the leaky, broken toilet in the bathroom.