GOP Debt Ceiling Gambit May Lead to Year-Long Battle
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The Fiscal Times
January 23, 2013

GOP lawmakers think they’ve outflanked the White House with their plan to suspend the debt limit for four months – but they’ve only prolonged a battle that will consume Washington and the country for much of the year.

The House is set to pass a bill later today that would put the $16.4 trillion debt limit on pause through May 18, so the government can continue operating without facing a likely default. The measure stipulates that the Senate pass its first budget in four years as a starting point – not an end point – for resolving partisan differences over spending cuts, entitlement reform and taxes.

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“Even when one party has a majority in both the Senate and the House, the two bodies often disagree,” said Rep. Sam Johnson of Texas, a senior Republican on the House Ways and Means Committee and booster of the plan. “Disagreeing isn’t the problem – the failure to resolve those differences is. And, how can we even start to find common ground if Senate Democrats won’t tell us where they stand in the first place?”

Although the House Republicans don’t know the exact GPS coordinates, they still have a pretty good idea of where the Senate Democrats and the White House stand.

COSTS TO THE ECONOMY
As the past two years have shown, adding time to the clock hasn’t brought the two sides closer to a lasting compromise.  Nor have the results of the November election and President Obama’s inaugural comments on Monday – which rejected Republican calls for cuts in Medicare, Medicaid and Social Security to slow the rate of growth for health care costs and reduce the deficit.

Continuing the debate ad infinitum doesn’t help the economy much. The Republican strategy, meant to increase the pressure on Democrats, will likely prolong the uncertainty that goes back to the previous debt ceiling showdown in 2011.

“I find it frightening and also hard to believe that we’re having this conversation in general and that we’re having hearings on this matter,” Simon Johnson, an MIT professor and former chief economist for the International Monetary Fund, told the Ways and Means committee. “I urge you to take the debt ceiling off the table…. Do it for our sake, do it for the world economy, do it for the global banking system, which has still not recovered from the fall of 2007 and 2008.”

Democrats are already repeating that argument about the GOP’s debt ceiling plan. “Manipulating it – today, next week or in three months – damages our economy and credibility,” said Michigan Rep. Sander Levin, the committee’s ranking Democrat.

Republicans are, in fact, trying to make the best of a tough situation. They must balance the burden of governance with the challenge of a divided government and a conservative wing of the party intent on shrinking Washington’s footprint.

Their strategy doesn’t technically raise the debt ceiling, since the bill only suspends applying the limit for four months. It creates the appearance of accountability by saying that senators wouldn’t receive their paychecks if they haven’t passed a budget by April 15. And without any kind of action on the debt ceiling, the country risks default as early as the middle of February.

RELATED: The Debt Ceiling: What Exactly IsIt?

“This is not a perfect solution but it seems to me it puts us back a little closer to regular order,” said Bill Hoagland, senior vice president of the Bipartisan Policy Center and a former Senate Republican budget adviser. “It gives Republicans an opportunity to come out of the swamp, and if they’re really worried about spending, they should be focusing on the sequester or the continuing resolution, and not on this debt limit.”

White House Press Secretary Jay Carney said today that Obama would sign the GOP plan if it crossed his desk, even though the president prefers a much longer extension of the Treasury’s borrowing authority.

“The House Republicans made a decision to back away from the kind of brinksmanship that was very concerning to the markets, very concerning to business, very concerning to the American people,” Carney said. “In the end, it's in the long-term interest of the United States economy that we remove the debt ceiling from this process that creates uncertainty, harms economic growth, does damage to the middle class, puts a stranglehold on markets. I mean, none of the outcomes here are good.”

The Republican gamble will only be successful if the additional time ends the years of gridlock. Without a breakthrough on that front, the government will essentially run on an ad-hoc basis, moving from stopgap to stopgap. “You’re going to do this every three months for how long?” the MIT economist Johnson groused at the hearing. “Until we have another election?”

But even with another election in 2014, there is no guarantee that either side would honor the results.
Voters clearly backed Obama last November, yet the Republicans retained their House majority and have shown little willingness to accept the administration’s approach to the budget.

Rep. Jim McDermott, D-Wash., complained at the Tuesday committee hearing that Republicans were trying to force through policies that were defeated at the ballot box. Their strategy – even if it shifts more of the political burden onto Democrats – depends on the fantasy that government paralysis won’t damage the economy.

“Listening to this hearing,” McDermott said, “we’re living in ‘Alice in Wonderland.’”

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.