How The Debt Limit Became ‘A Nuclear-Tipped Leverage Point’
Monday, October 14, 2013
Political battles over the debt limit have been around nearly as long as the law passed by Congress in 1917 that set a statutory limit for how much debt the Treasury could accrue.
Since then, Congress has had to increase that limit on more than 100 occasions -- and 40 of those times, lawmakers have tried to tie strings to raising the debt ceiling. In the last few years, though, there's been a marked escalation in those demands.
When Treasury Secretary Jack Lew went before the Senate Finance Committee late last week, he put President Obama's Republican adversaries on notice: "We cannot have the debt limit be something that's a threat to the economy unless policy concessions are made -- that's not how our democratic system works. A minority can't do that."
Oh, yes, it can, countered Mitch McConnell, the leader of the Senate's GOP minority. On the Senate floor, McConnell said Obama's refusal to make concessions in this standoff breaks with tradition.
"It's not the way presidents of both parties have dealt with this problem in the past," he said. "Reagan negotiated. Clinton negotiated. And if President Obama wants America to increase the credit limit, he'll negotiate, too."
In fact, Obama tried to negotiate with House Speaker John Boehner in the summer of 2011 to raise the debt ceiling. The president's lingering exasperation with that episode in many ways echoes one of his Republican predecessors.
In a 1987 White House radio address, President Ronald Reagan complained about a debt-ceiling deal that congressional Democrats had just muscled through.
"Congress consistently brings the government to the edge of default before facing its responsibility," Reagan said. "This brinkmanship threatens the holders of government bonds and those who rely on Social Security and veteran benefits."
But economist Alice Rivlin, a veteran of some of those earlier debt-ceiling battles, says they were tame compared to what's going on now.
"The mood is very different, the depth of the antagonism is very different and the risk-taking is different," she says.
Rivlin was White House budget director during the Clinton administration, a time she says when there was no talk of defaulting on the debt.
"Nobody thought in the '90s that we would breach the debt ceiling," she said. "There were attempts to attach things, but it was really much more symbolic than real."
Early in 2006, as the Iraq War raged, a Republican-led Senate voted on raising the debt ceiling, and along with every other Democrat, then-Sen. Barack Obama voted no. The only thing attached to that measure was the Democrats' disapproval.
Five years later, as president, Obama told ABC that no vote was a mistake.
"As president, you start realizing, 'You know what? We can't play around with this stuff. This is the full faith and credit of the United States,' " he said. "And so that was just a example of a new senator, you know, making what is a political vote as opposed to doing what was important for the country. And I'm the first one to acknowledge it."
Obama recently told reporters that by raising the debt ceiling, Congress is simply allowing financing for spending it has already approved. But it's still a tough vote.
Allen Schick, a congressional budget expert at the University of Maryland, says it has always been a challenge for either party to round up enough votes to boost the debt limit -- which is why Congress found various ways over the past quarter century to avoid holding actual votes on raising the debt ceiling.
"The issue then was really different than it is now," he says. "Then it was an issue -- 'We're short of votes.' Now there's an issue of demands made by the two parties which are not acceptable to one another."
Rep. Peter Welch, a Vermont Democrat, says the debt ceiling has simply become an opportunity for Congress to make mischief.
"It's a nuclear-tipped leverage point," he says. "And this year, of course, the Tea Party folks are using it. But if this becomes a legitimate tactic, you might find a Democratic faction three or four years from now saying they want to use it. My view: We should disarm."
Welch co-sponsored a bill this year to abolish the debt ceiling. So far it's gone nowhere.
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