The Debt Ceiling and Why Some Republicans Would Drive Us Off a Cliff
In preferring default to a deal, the GOP’s populist wing has demonstrated its new nihilistic streak.
Call them Debt Ceiling Deniers. Believers in faith-based fiscal policy. Math-challenged cause-and-effect-skeptics. And an uncomfortable chunk of the GOP’s 2012 contenders.
The costs of courting conservative populists should be clearer than ever to reality-based fiscal conservatives inside the Republican Party. Their “all-or-nothing” meets “what, me worry?” negotiating stance is not only the newest symbol of D.C.’s dysfunction—it is beginning to have an impact on the entire U.S. economy.
After all, S&P is now warning of a possible downgrade to America’s credit rating because of concerns about our political ability to raise the debt ceiling by August 2. Moody’s similarly announced it is considering a downgrade of the U.S. bond rating. Bush-appointed Fed Chairman Ben Bernanke calls the looming prospect of a default on our debt “catastrophic.”
But Michele Bachmann believes it’s all a hoax. Tim Pawlenty told an Iowa crowd, “I hope and pray and believe they should not raise the debt ceiling.” Ron Paul based his first presidential ad on a call to not raise the debt ceiling, proclaiming “No Deals.” And Rick Santorum has said that raising the debt ceiling should be avoided until a Balanced Budget Amendment to the Constitution is passed.
This position is a long way from saying the vote to raise the debt ceiling should be contingent on a deal to reduce the deficit and the debt. It is not looking for leverage or savvy negotiation on the way to a settlement. Instead, it is prideful ignorance—an eagerness to go off the fiscal cliff to show the world that gravity does not exist.
The fact that defaulting on our debt would raise interest rates—deepening the fiscal hole we’re in by compounding the size of our deficit and debt overnight—is not addressed. Instead we are greeted with nihilistic bubble talk—at its best, economic incompetence and at its worst evidence of tactical Leninism—the belief that “the worse things get, the better they are for me politically.”
This attitude is gaining adherents among conservative populists in Congress. Here’s Texas Congressman Louie Gohmert—a co-sponsor of the Birther Bill, who infamously argued against the Hate Crimes Bill by equating homosexuality with bestiality, necrophilia, and pedophilia—condemning Speaker Boehner for buying into the alleged myth of the August 2 deadline: “The speaker is getting bad advice…I guess the problem with the speaker and him saying that [the debt limit needs to be raised by August 2] is that he listened to the president. I’ll urge the speaker not to believe the president anymore.” This is what passes for reasoning together right now.
In an epic bit of projection, Gohmert also accused the president of fear-mongering by saying factually that failure to raise the debt ceiling could cause Social Security checks to not be mailed out on time. Gohmert specifically pined for some FDR-style optimism to override any sense of real-life consequence for failure to pay our debts. “Instead of being a statesman leader and saying something like, ‘The only thing we have to fear is fear itself,’” Gohmert said, “this president tries to create fear and panic in the American public at every turn.” Pot, meet kettle.
If you argue with a fool, you’ve got two fools. Nonetheless, I thought a reality check might help some of the Republicans in Congress currently deciding how they’ll vote as we pedal ever closer to the cliff that is the August 2 deadline.
So I reached out to two former Republican chairmen of the Council of Economic Advisors, with presumably impeccable fiscal conservative credentials: Michael Boskin, who served under Bush 41, and Glenn Hubbard, who served under Bush 43.
“A real default would have severe ramifications in financial markets and the economy. We need to maintain the full faith and credit of U.S. government securities,” says Boskin, now a senior fellow at the Hoover Institution. “The deficit and debt are primarily a spending problem that could condemn us to stagnation or stagflation if not seriously addressed soon. So trying to leverage the debt ceiling increase into spending control makes economic sense...The worst outcome is a default with no real spending control.”
While you’re digesting that considered opinion, here’s Glenn Hubbard, advocate/architect of the Bush tax cuts and dean of the Columbia Business School. “The debt ceiling must be raised—not doing so is irresponsible,” Hubbard emailed. “The real discussion needs to be about to stabilize, then reduce America’s burgeoning debt-to-GDP ratio…From here, the most sensible path would be an agreement on spending reductions. Then should come a debate (post-raising the ceiling) over reducing entitlement spending versus raising taxes. That debate can also address raising marginal tax rates (as the president proposes) versus limiting tax expenditures (as the [Bowles-Simpson] commission proposes). These debates will be the domestic policy stage for voters to judge in 2012.”
Got that? The deficit and debt are serious problems. Let’s have a vigorous debate on how to best address them. Let’s negotiate the best deal possible with spending cuts, tax reform, and entitlement reform. And then let’s put alternatives to the American people in 2012. But don’t take the U.S. economy off a cliff just to prove your point.
Senate Minority Leader Mitch McConnell’s proposal—a procedural plan that would allow the president to unilaterally raise the debt ceiling as long as he promised a commensurate amount of spending cuts—seems to me an acknowledgment that the conservative populists could stop a debt-ceiling vote, something that strikes McConnell as fiscally irresponsible and politically unwise for the Republican Party. It is a tacit admission that the inmates are damn-near running the asylum.
The deal-makers in the Republican Party—like Speaker John Boehner—are finding themselves fighting with debt-ceiling deniers, with the full faith and credit of the United States hanging in the balance.
Even supposedly responsible Republican presidential candidates like Mitt Romney—whose campaign slogan might as well be ‘He’s the Sane One’—are finding it politically beneficial to flirt with debt-ceiling denial, announcing a ‘cut, cap and balance’ proposal without revenue increases as his ‘line in the sand’ for supporting raising the debt limit.
But this beast cannot be appeased. As with all absolutists, the goal-posts keep moving. Two months ago, Rick Santorum wrote: “Before we again raise our nation’s debt ceiling, we must insure that the major components of our exploding debt are under control, namely our entitlement programs.” Now President Obama has put entitlement reform on the table. But a different standard is applied, because making a deal is not as important as making a point.
The debt-ceiling deniers could be dismissed as just another branch of the conservative populist tribe at war with modernity. Except this time the enemy isn’t science—it’s math. And international markets don’t respond well to denial.
The growing popularity of this position among the 2012 contenders should cause real fiscal conservatives in the GOP to take a hard look in the mirror—because the conservative populists they have helped empower for short-term political gain are making long-term fiscally responsible governance almost impossible.
By encouraging default, the debt-ceiling deniers are playing politics with people’s daily lives. They are making the prospect for economic recovery even more distant while unintentionally adding credence to our competitors’ mistaken belief that America is a great power in decline.