The Debt Limit Is Not the Issue

I have to admit that I’m a little frustrated with the narrative that’s been built up around Donald Trump’s decision to side with Chuck Schumer and Nancy Pelosi on the length of a debt limit extension. This is for a few reasons, actually. Maybe the most aggravating thing for me is that it’s placing all the focus on one aspect of one part of what was a three-part deal that also provided for a clean continuous resolution to fund the government for 90 days and a clean disaster relief bill with no offsets or re-negotiations on defense vs. other discretionary spending.

“Haven’t seen anything like it before. I have no way of divining his motives. I’m a pretty intelligent guy, but I don’t understand this.”

— Sen. John McCain (R-AZ), quoted by the Washington Post, on President Trump’s surprise deal with Democrats to raise the debt ceiling.

That’s one way to respond. Another way was provided by Sen. John McCain’s neoconservative soulmate Lindsey Graham of South Carolina who explained his vote against emergency relief for victims of Hurricane Harvey by saying the bill did not increase the level of defense spending.

“I do not support a continuing resolution that locks in defense spending that is below acceptable levels and denies the military the ability to engage in long-term planning,” he said. “Our men and women in uniform deserve better. The 90-day CR — with defense spending set at sequestration levels — continues a problem for our military that should have been fixed a long time ago.

In the past week, I have twice referred to the Heritage Foundation’s action plan for September in an effort to provide you with a glimpse of what the conservatives wanted and expected the Republican leadership and the White House to do this month. Let’s look at this document again. Here is one of Heritage’s most important demands:

Congress should reject any attempt to increase overall discretionary funding levels. Instead, lawmakers should prioritize national defense funding within the [Budget Control Act] BCA spending limit for FY 2018, and offset any defense funding increase with cuts to domestic programs.

What this means in laymen’s terms is that the Republicans should break a deal (set in law) that discretionary spending increases must be split fifty-fifty between defense and non-defense spending. They should get more defense spending, yes, but they should not agree to more spending overall. So, if the authors of this report had been sitting in the White House with Trump and Schumer and Pelosi and McConnell and Ryan, they would have been arguing against a clean continuous resolution that keeps an even split. The problem here is that the Democrats would have laughed at them.

Knowing this, the Heritage authors recommended going ahead with a government shutdown.

A major problem with such massive funding deals moving in Congress at the 11th hour, before funding is scheduled to lapse, is that these deals are prone to maintaining the status quo of too much funding, for the wrong purposes, including corporate welfare programs, and functions that should be delegated to states, localities, and the private sector.

A discretionary funding lapse would result in a partial government shutdown beginning on October 1. Such a “shutdown” would be neither catastrophic nor unprecedented.

The ultimate purpose of the government shutdown would be to get to a point where the Republicans can break the Democrats’ will and renegotiate the fifty-fifty discretionary split as part of a deal to bust the overall cap in spending provided for in the Budget Control Act:

On May 23, President Donald Trump released his full FY 2018 budget proposal. The President’s proposal calls for the elimination of the firewall between defense and non-defense spending. This firewall roughly splits the overall discretionary funding allocation between defense and non-defense. This parity is arbitrary and a political construct from the Obama era…

…A better approach than increasing the caps in 2018 or beyond would be to commit to keeping within the BCA caps through 2021, and extending them far beyond their current expiration date. In order to ensure that necessary defense needs can be met, Congress should remove the firewall dividing defense and non-defense spending, adopting one overall discretionary spending cap instead.

From Lindsey Graham’s point of view, defense spending at current levels is grossly inadequate and the object of any negotiations on the Republican side should be to remedy that situation. Ideally, Graham would like to get what he wants without giving anything back in return, so the Heritage solution looks about right to him. Regardless, a clean continuing resolution represents a defeat.

Now, on the debt limit, the Heritage authors were concerned that a deal would be struck to increase allowable levels of discretionary spending (which would be bad) without breaking the fifty-fifty split (which would be worse). Their ambition was to go in a different direction:

Congress should not raise the debt limit with another bad budget deal. Rather, Congress should address the debt limit separately, and adopt spending controls before raising the debt limit again.

One approach is for Congress and the Administration to include the debt limit as part of a broader budget package that provides spending and tax relief through reconciliation.

This is magical thinking, and to see why all you need to do is to place yourself in the White House meeting and imagine that the way you were going to convince Schumer and Pelosi to provide their caucuses’ votes would be to demand that they relent to your filibuster-free tax cuts.

But magical or not, the position of the conservatives was that they should be getting massive concessions in return for nothing. Ryan and McConnell knew that this wasn’t a viable negotiating stance to take. In fact, they entered the meeting in the position of supplicants. On their own, they could not prevent a default of the nation’s sovereign debt, nor could they avoid a government shutdown. They did not come in with unreasonable demands about defense spending or tax cuts. They came in asking for an eighteen month extension of the debt ceiling which would have allowed them not to find themselves in the same position of begging for Democratic support again before the midterm elections. Treasury Secretary Steve Mnuchin lent support to the merit of this request by arguing that the markets need some stability.

But, Schumer laughed in his face, pointing out how politically convenient the eighteen month extension was for the Republicans. Reports say that the Ryan and McConnell quickly retreated to a more reasonable position of a six month extension. This immediate retreat is overlooked in nearly all the reporting. It wasn’t Trump who caved from the outset.

What followed was a debate of the merits of a three-month versus a six-month debt ceiling extension. This was hardly as consequential as it is being portrayed. It’s true that the 90-day version jams the Republicans up around Christmas, but the 180-day would still have jammed them up long before the midterms. It’s not really shocking that Trump grew weary of the argument and sided with the Democrats. The meeting really had one purpose, and that was to win the Democrats’ support for a deal. Schumer might have agreed to 120 days had he been offered something more in return, but he was going to win one way or that other.

The most important thing to understand about the meeting and the negotiations is that the Democrats were in the strongest position and Ryan and McConnell were in the weakest.  As I’ve said repeatedly, Trump only found himself in this quagmire because he followed a legislative game plan that Ryan and McConnell sold to him back during the transition. The plan did not work.  It was now at a dead end.

It might be hard to see Trump as any kind of strategist, but he had all of August to prepare for this showdown. He cleaned his administration of Priebus, Bannon and some other uncompromising folks and put John Kelly in charge as his chief of staff. Kelly then consulted with former Clinton chief of staff Leon Panetta. A strategy emerged, but it was a strategy dictated by constraints rather than ideology. It wasn’t a straight line. You could see Trump clawing at the burlap bag he was being placed in, calling one moment for money for his wall and at another blaming McConnell and Ryan for not taking care of the debt limit earlier. But certain facts couldn’t be avoided. And the most important fact was that Ryan and McConnell had not delivered on their promises and did not have a plan to avoid a default and a shutdown. Trump would have to pivot to the Democrats.

A lot of people think Trump agreed to the 90-day deal in a kind of vindictive way, as punishment or to humiliate McConnell and Ryan. I think a better way to understand his decision is to focus on how useless they’ve been to the president and how badly he’s suffered for putting his faith in them up to this point. They had literally nothing to offer him in that meeting. They had no credibility with him. Schumer and Pelosi were the people who mattered, and Ryan and McConnell were the reason they mattered.

Another thing to consider is that Trump’s most immediate need was disaster relief. He needed the meeting to come to a resolution, not break down without an agreement. Consider what Paul Ryan said yesterday:

In a live interview Thursday morning with The New York Times, Ryan shrugged off the notion that Trump was being dismissive of Republicans, instead saying his “read of the moment” was that it was an attempt to unite the country while hurricanes are pummeling parts of the US.

“What the president didn’t wanna do is have some partisan fight in the middle of the response to this,” Ryan said. “He wanted to make sure that in this moment of national crisis where our country’s getting hit by two horrible hurricanes, that he wanted to have a bipartisan response and not a food fight on the timing of the debt limit attached to this bill.”

That might sound like after-the-fact rationalization, but it’s probably more accurate than the “narrative.” In the context of everything Trump was considering at the moment, the difference between a three-month and a six-month debt ceiling extension did not seem very important, and really wasn’t very important.

Finally, the whole eighteen month argument misses something key, which is that the conservative position ought to have been that the debt ceiling shouldn’t be raised at all without corresponding cuts, and lacking that it should be extended for the shortest period possible. The Heritage authors’ September action plan didn’t ask for a clean eighteen month extension:

Cut spending and adopt a path to balance the budget before increasing the debt limit. Lawmakers should adopt fiscal controls, such as a Swiss-style debt brake or other similar expenditure limit, to rein in out-of-control entitlement spending.

The Freedom Caucus members were actually gearing up for a fight, thinking they could exact spending cuts from the Democrats in return for any extension of the debt ceiling.

But the dirty truth of the matter is that Ryan and McConnell hate nothing more than having to ask their caucus to vote to pay our bills. They don’t want to do it once, let alone twice. And the Republican lawmakers, most of them anyway, hate having to vote on the debt ceiling. The majority of them are genuinely angry that the extension didn’t get them past the midterms despite all their rhetoric suggesting that they shouldn’t have wanted any clean extension at all.

The ideological concession was agreeing to a clean debt ceiling. There was also a clean continuing resolution in this deal with no crap about Planned Parenthood or funding for a border wall. That was another concession that no one is talking about because of all the focus on the eighteen month issue. And remember when a bunch of Republicans voted against Hurricane Sandy disaster relief because it didn’t have spending offsets? Well this was a clean disaster relief bill, too.

Congressional Republicans put themselves in this position to get nothing in September. Trump merely followed their advice. There was a very predictable point in time when Trump would have to stop following Republican advice and that was now, this month.

He didn’t change because he had an epiphany or his heart grew three times in size. He changed because of hard deadlines that couldn’t be met by his own political allies. Even from the vantage point of January, this moment had a gigantic road sign, saying “Up Ahead in September.” You only had to have the right glasses to see it, apparently.

Martin Longman

Martin Longman is the web editor for the Washington Monthly and the main blogger at Booman Tribune.