The Next Cliff: Another Round of Debt Brinkmanship Looms
The fiscal cliff was a lousy metaphor. It wasn’t really a cliff; the country tore past the deadline without plunging. The combination of deep spending cuts and damaging tax hikes Congress averted on New Year’s Day was the latest in a cascade of budget fights that convulsed the 112th Congress, wrenching the U.S. government into a state of near-continual crisis. Like the others, the cliff was a crisis of Congress’s own making. Originally devised as a solution to the last self-inflicted calamity — the debt-limit negotiations that threatened to detonate the U.S. economy in the summer of 2011 – the widely panned deal instead guarantees another round of brinkmanship.
The automatic cuts to military and domestic programs that the cliff deal averted, known as “sequestration,” now come due at the end of February. Around the same time, the Treasury Department will deplete the stock of accounting gimmicks it can use to stretch the $16.4 trillion debt limit, which the U.S. reached once again on New Year’s Eve. So the pact postpones the pain for a mere two months. A month after that, the U.S. will run out of money to fund the government. The last act of this Congress — among the least popular and most unproductive in history — was to punt a final time, bequeathing to its successor the kind of messy impasse that marked the past two years.
Washington’s descent into dysfunction didn’t begin with the 2010 midterm elections. Gerrymandering, the filibuster, the rise of partisan media and waning comity on Capitol Hill all played a role. But the 87 House Republican freshman swept into Congress by the Tea Party wave have, as promised, reshaped the way the capital does business.
Beginning early in 2011, the new Republican majority began to weaponize routine procedural votes in a war to scale back the size of government. First they eradicated earmarks. In early spring, they nearly shut down federal operations in a fight over the budget. But it was an innovative tool of destruction that nearly brought the nation to its knees later that summer, when conservatives used a vote to increase the U.S. borrowing authority — a vote that many House Republicans cast 19 times at the behest of George W. Bush — as a way to force draconian spending cuts. By turning the debt ceiling into a nuclear button, Congressional Republicans took the economy hostage to their cost-cutting ideology, Michael Grunwald writes in the new issue of TIME. “The idea that the President can’t borrow to pay for congressionally authorized spending without new congressional legislation is a recipe for disaster,” Grunwald writes. Now the hostage taking is set to begin again.
All but 17 House Republican incumbents were re-elected to the 113th Congress, which begins Jan. 3. Those members are livid that the cliff accord contained some $620 billion in new tax revenue, according to the Congressional Joint Committee on Taxation, while Democrats safeguarded federal spending programs that Republicans sought to pare back. “The lack of spending cuts” was a “universal concern amongst members,” said Brendan Buck, House Speaker John Boehner’s spokesman. Eighty-five Republicans, including Boehner and Budget Chairman Paul Ryan, voted for it anyway, reasoning that even a bad deal was preferable to the alternative. Nearly two-thirds of the conference saw things differently.
In the cliff deal, Republicans were boxed in by the toxic politics of preserving tax cuts for the wealthiest Americans. They knew they held a weak hand. The upcoming fight over the debt limit is different. Even though the last round of debt-limit roulette damaged the GOP brand and downgraded the nation’s credit rating, Republicans say they have leverage. They intend to use the next round to extract a dollar of spending cuts for each dollar Obama seeks to increase the U.S. borrowing authority.
A debt-ceiling sequel was a skirmish Obama sought to avoid. During the cliff negotiations, Obama tried to gain the authority to hike the nation’s borrowing limit without Congressional approval. That effort collapsed when a broader bargain fell apart. But Obama is still vowing not to be held hostage. “While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” he said late Tuesday night. “Let me repeat: We can’t not pay bills that we’ve already incurred. If Congress refused to give the U.S. the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic – far worse than the impact of a fiscal cliff. People remember, back in 2011, the last time this course of action was threatened, our entire recovery was put at risk. Consumer confidence plunged. Business investment plunged. Growth dropped. We can’t go down that path again.”
The economy wouldn’t be the only casualty. Another protracted budget brawl would sidetrack Congress from other tasks. Obama’s ambitious 2013 legislative agenda includes gun-control legislation and comprehensive immigration reform in addition to tax and entitlement overhauls. Washington has been incapable of meeting any of these challenges in recent years. A debt-limit fight would gum up all of them.
Heralding the cliff deal, Obama summoned the optimism to spin the budget battles that beguiled his first term as incremental progress toward the goal of deficit reduction. “We are continuing to chip away at this problem, step by step,” he told reporters during a late-night visit to the White House briefing room. “Last year I signed into law $1.7 trillion in deficit reduction. Tonight’s agreement further reduces the deficit by raising $620 billion in revenue from the wealthiest households in America. And there will be more deficit reduction as Congress decides what to do about the automatic spending cuts that we have now delayed for two months.” Of course, Obama was forced into such measures by an obstinate opposition. Nor is it clear how he’ll avoid being drawn back into a cycle of budget crises that shows no signs of abating.
By Alex Altman