Wednesday, October 20, 2021

The Political Psychology of Fiscal Numerology - Debt Ceiling Edition

 by Michael C. Dorf

Last week I joined Congressman John Yarmuth as a panelist in a program moderated by former Congressman Steve Israel as well as my Government Department colleague Professor Doug Kriner and Erin King Sweeney, who serves as senior associate director of Cornell's Institute of Politics and Global Affairs, which sponsored the event. The panel discussion had been set up a week earlier, when it appeared that it might be occurring just as the global economy was melting down under imminent threat of a U.S. default on its debt obligations.

The short-term increase in the debt ceiling somewhat alleviated the sense of immediately pending doom, but the timing was nonetheless noteworthy because earlier that day Congressman Yarmuth--who chairs the powerful House Budget Committee--announced that he would not seek re-election in 2022. Although Yarmuth is the sole Democrat in Kentucky's delegation, his seat is unlikely to turn red even after redistricting, because his district already reflects the Republican state legislature's efforts to "pack" Democrats from Louisville and environs into a single district, thus rendering the rest of the state's delegation safely Republican.

Nonetheless, Congressman Yarmuth's retirement will be a major loss for the Democratic Party and the country, as he is a dedicated and highly effective public servant. During our discussion, he made some statements endorsing so-called modern monetary theory with which I disagree, but we were in complete agreement on everything directly related to our subject: the debt ceiling. Interested readers can watch the video of the hour-long program here.

In the balance of today's essay, I want to explore a couple of puzzling claims that Congressman Yarmuth made about political psychology--claims I have no reason to doubt, as I trust his own political sense more than my own. My goal, then, is not to question the claims but to explore them.

Before coming to the psychological claims, I need to set the stage with some background points.

Separately and in joint projects, Professor Buchanan and I have written numerous law review articles, Verdict columns, blog posts, and (in Professor Buchanan's case) a book on the debt ceiling, I won't recap any of our arguments here, except to say that we think the public policy case is overwhelming for, in order of preference: (1) permanently repealing the debt ceiling; or if that's not politically possible (2) reinstating the Gephardt rule, under which it increases automatically as needed; or if that's not politically possible (3) suspending the debt ceiling for as long a period as possible; or if that's not politically possible (4) increasing the debt ceiling by as much as politically possible.

Unfortunately, only option (4) can be accomplished via the reconciliation process, which is not subject to a Republican filibuster. Why only option (4)? Because the federal statute that sets out the rules for reconciliation authorizes Congress to use the process to "specify the amounts by which the statutory limit on the public debt is to be changed." A particular increase in the debt ceiling is thus permitted via reconciliation, but outright repeal, the Gephardt rule, and suspension would all require the ordinary legislative process, which could only get started if ten or more Republican Senators once again blink and permit Congress to act on the debt ceiling via the ordinary legislative process or if fifty (but really two) Democratic Senators nuke the filibuster either generally or specifically for the debt ceiling. Neither event seems likely, meaning that the next change to the debt ceiling will probably need to occur via reconciliation, and therefore it will need to take the form of a dollar-amount increase--i.e., via my least-favored option, (4) above.

To be sure, option (4) could be made to serve as a de facto version of option (1). Congress could increase the debt ceiling to a number that is so high that it could never be breached. For example, Congress could raise the debt ceiling to $10100--which is twenty orders of magnitude more dollars than there are particles in the observable universe. Even if the U.S. were to experience hyperinflation to the point at which wheelbarrows of cash are needed to purchase a loaf of bread, a debt ceiling number that high would be effectively infinite.

Yet the political forces that prevent outright repeal of the debt ceiling also prevent its increase to a very high number. Those forces are ignorance of what the debt ceiling is among the general public and an appetite for demagogic exploitation of that ignorance by Republican members of Congress during Democratic presidencies. Democrats who vote to repeal the debt ceiling risk becoming the target of political attack ads saying that that they "voted for the government to borrow money from our children and grandchildren with no end in sight." Attack ads that focus on a very large number would seem at least at effective in exploiting public ignorance about the debt ceiling.

But that brings me to the puzzle. During our discussion, Congressman Yarmuth said that gun-shy Democrats would ultimately be able to vote to increase the debt ceiling via reconciliation because, as stated in the statute I linked above, they would not be required to specify a new total debt ceiling, but instead would specify by how much they were increasing the debt ceiling. That was the first puzzling claim. The second puzzling claim was that, given the amounts in question, it should be possible to specify a number a little bit under a trillion dollars.

Again and to be clear, when I say these claims are puzzling, I don't mean that Congressman Yarmuth's political sense is off. What's puzzling to me is why the politics would work out the way he suggests.

Consider the first claim. As a result of the most recent increase, the debt ceiling currently stands at $28.88 trillion. I suppose that a bill that expressly adds $900 billion to that number sounds to the average mostly-uninformed voter like it's adding less debt than one that expressly raises the debt ceiling to $29.78 trillion. "Trillions" sounds like and is a lot more than "hundreds of billions." But of course our mostly-uninformed voter is easily led. That's why they mistakenly think that increasing the debt ceiling "adds to the debt" in the first place. Meanwhile, it wouldn't even be inaccurate for the attack ad to say that a Representative or Senator who voted for the $900 billion increase "voted to raise the debt ceiling to $30 trillion" (using standard rounding conventions). So it's a puzzle to me why specifying the increase rather than the new total would be politically advantageous.

I'm also puzzled by the second claim. I get that raising the debt ceiling by $900 billion might sound like substantially less than raising it by $1trillion. Indeed, raising it by $999.999 billion might sound like substantially less than raising it by $1trillion. Merchants commonly price items at just below some round number because consumers see $99.99 as more than a penny less than $100, even though it isn't and if they thought about it they'd know it isn't. Still, because the risk here is political, the same dynamic explored in the previous paragraph applies. If an attack ad tarring a member of Congress with "raising the debt ceiling by hundreds of billions of dollars" would be less effective than one tarring them with "raising the debt ceiling by a trillion dollars," the political opponents can simply substitute the resulting number and accurately accuse the member of Congress of raiding the debt ceiling to however many trillions of dollars it now adds up to.

Indeed, this second point is more than a puzzle; it's a concern. If Congressman Yarmuth is right, then the plan in December is to raise the debt ceiling by something less than a trillion dollars--which would require that it be raised again pretty soon, perhaps before the midterm elections. Surely the political cost of going back to this issue again, closer to the next election, is greater than the cost of raising it by enough to put off any needed future increase for at least a couple of years. But I say "surely" there without any confidence in my view, because--unless I misunderstood him--Congressman Yarmuth was saying that those of his colleagues who worry about the political consequences of raising the debt ceiling will push for a minimal increase.

I hope that I misunderstood Congressman Yarmuth or that if I understood him correctly, he's overstating the reluctance of his colleagues to go big on a debt ceiling increase in the coming bill. Congress should substantially increase the debt ceiling. Instead, it seems intent on a substantial increase in the frequency of debt ceiling crises.