How Is It Possible That the Debt Ceiling Is a Thing Again?

by Neil H. Buchanan
"Just when I thought I was out ... they pull me back in!"  OK, I am certainly no Michael Corleone (as far as anyone knows), but this classic quote captures how I have felt in the last few days.
Earlier this year, I almost could not believe it when I saw that congressional Republicans had begun floating the idea of again using the debt ceiling to extort concessions from a Democratic president.  In the ensuing obligatory Verdict column on April 29, I wearily argued that Joe Biden might be the president who would finally put this all to rest.  Mostly, however, I hoped that the Republicans would not try to bring back their debt ceiling madness at all.  I am tired of the inanity of it.

So much for that hopeful thought.  Last week, Mitch McConnell announced that Senate Republicans will not agree to adjust or re-suspend the debt ceiling before (or after) it is scheduled to come back to life on July 31.  Earlier today, I published a new Verdict column responding to the new reality that the Republicans are indeed going to take hostages with the debt ceiling again.

I have a few thoughts to add here, but the important thing to remember is that this is yet another situation in which Republicans have not only thrown out all norms and any sense of restraint but are acting with utter disregard for the law.
If any president were ever to be forced to face a binding debt ceiling, and if he or she chose (wrongly) to refuse to pay the nation's bills in response, that would be a matter not of reducing government debt in the future but of failing to honor obligations that already exist based on past decisions, as I explain below.  That is the opposite of fiscal responsibility.

What more is there to say?

Somehow, this political move by Republicans is wrapped up in the minutiae of the Senate's filibuster rules.  The reporting was not clear, and because I simply refuse to go down that rabbit hole, I can only report with something well short of certainty that somehow Republicans think that the Senate's rules regarding reconciliation, which exist to allow the majority to evade the Senate's rules on the filibuster (but only under some circumstances), somehow allow a reconciliation bill to include a numerical increase in the debt ceiling but not a suspension of the debt ceiling?  Why?  Well, why not?

Mostly, Republicans seem to think that they will gain some political advantage by forcing Democrats to vote for a bill that puts a specific number on the debt ceiling -- "The debt ceiling is hereby increased to $25.4 trillion," or whatever -- rather than following McConnell's example and putting the debt ceiling to sleep for some amount of time and then bringing it back at a higher number.

I suppose one can see where the political advantage would arise, in that Republicans could then run ads saying that every Democrat just voted to run up $25.4 trillion in debt.  I have never understood why that plays politically worse than, "Senator X just voted to eliminate the debt ceiling for two years and then to increase it to whatever huge number the Democrats can run up in the meantime," but if anyone knows how to find political edges, it is McConnell.

As I have argued over the years, including in that April 29 column, even repealing the debt ceiling would not necessarily make the madness end, because it is certainly possible for future Congresses to bring it back at any time.  It is, after all, a simple statute, and although Mike Dorf and I have argued that it is an unconstitutional statute, the likelihood of the Supreme Court holding as much -- or even taking such a case -- is remote.

Is there a workaround?  What was once called the Gephardt Rule required Congress to include in any fiscal measure an increase in the debt ceiling sufficient to prevent the limit from being breached by the contents of that measure.  That is, if the debt were $10, and a new bill would (taking into account all other relevant law) add $2 to the debt, then the new bill would have to include a provision increasing the debt ceiling to $12.

Given that this entire farce is all about political posturing -- not "shrinking government" or "bringing fiscal sanity," because those things can be accomplished (under whatever definitions of sanity one likes) by changing actual spending and tax laws, not the debt ceiling -- the only question is how to allow the debt to rise as required by the law in a way that does not have bad optics.  Or, from the Republicans' standpoint, to force bad optics on the Democrats.

Again, I do not want to become an expert on the filibuster/reconciliation rules, but I do wonder whether there is an alternative to the either/or choice between suspending the debt ceiling or increasing it to a specific dollar amount.  Would the optics look better if Democrats passed a bill embodying a Gephardt Rule: "The debt ceiling is to be adjusted by the amount that the Secretary of the Treasury determines is necessary to allow all of the government's legally binding financial commitments to be met, after taking account of the provisions in this bill and in all existing laws that bind the United States and could impinge on the nation's full faith and credit"?

See?  No specific number, and not even the word "increase"!  That might actually have better optics for Democrats than a suspension, which Republicans would surely deride (hypocritically, but what else is new?) as tantamount to repealing the debt ceiling and thus "allowing the national debt to rise literally without limit!"
If every fiscal-relevant bill (all of which are, as far as I know, eligible for majority-rule reconciliation status) simply said, "Adjust the debt ceiling as needed, no more and no less," and adding language along the lines that I included above about "commitments" and any other language that one wishes to add regarding responsible governance, then the optics would be pretty good for Democrats.

I will end here by emphasizing a point that I made in today's Verdict column, which reflects an extended argument that Professor Dorf and I made in our fourth and final law review article on this topic in 2014.  There, after having spent literally years and having written thousands of words about the debt ceiling, we at long last confronted the underlying illogic of the very idea that a president must refuse to borrow money when the debt ceiling becomes binding.

We noted that, both as a matter of logic and in accordance with the relevant legal definitions, a president who stiffed obligees on owed payments would nonetheless increase the debt.  "I can't pay you now, because we're at the debt ceiling (of, say, $12) and thus I can't borrow the $1 needed to meet the government's obligation to you.  We'll get back to you after the debt ceiling is increased."

Where are we at that point?  The government owes $12 to traditional lenders (holders of Treasury securities), and it owes $1 to the person who has involuntarily been turned into a creditor.  The government owes $13, in other words, not $12, and thus exceeds the debt ceiling, even though the president tried not to allow that to happen.  Rather than borrowing $1 from someone who voluntarily enters into such a loan, moreover, we would force someone who might be harmed by the loss of cash flow to become a lender to the government.

That sweeps away quite a bit of nonsense.  When we argued previously that a president would have to issue debt in excess of the debt ceiling, the response even from non-frivolous scholars was, "But wait, that can't be right, can it?  I mean, the debt ceiling is a law."  Our response (to which no one even ventured a reply) was that because the president would have to violate one law or another, he had to make the least-bad choice.

Although we still stand by that analysis, this last bit is much more stark.  Once Congress commits the government to making payments, the payments (assuming tax revenues are insufficient) will increase debt one way or another.  So making the more-bad choice does not even solve the problem that it purports to solve.

In the end, of course, none of this matters, because we are in an era where Republicans simply do not care about the rule of law.  They do things that they think will give them political advantage, no matter how outrageous.
The coldest of cold comfort that I can take from this is that the debt ceiling madness will no longer matter after the Republicans turn the U.S. into a one-party state, which (partly thanks to the filibuster) Democrats are not going to stop.  So the debt ceiling will soon be the least of our problems.  Optimism!