During the Obama years, the politics of the debt ceiling were simple for conservatives: President Barack Obama was the adversary, and they should use the debt ceiling as a tool to gain as many concessions from him as possible.
With a Republican in office, though, the politics are much more difficult.
Especially because that Republican, Donald Trump, is an ideologically flexible one who just unexpectedly cut a deal with Democrats to suspend the debt ceiling until December and then immediately suggested eliminating the debt cap altogether.
For now, conservatives are warily giving Trump the benefit of the doubt. They are proceeding with the understanding that the surprising deal, rushed together in part to provide aid to hurricane-stricken southern states, is not the beginning of a separation of the White House from the Right.
Yet, they are concerned. And the sudden reversal in early September raises the prospect of major conflict among Republicans the next time the debt ceiling has to be lifted, sometime early next year. That is likely to be sometime in early 2018, according to Treasury Secretary Steven Mnuchin, when the government will have exhausted its options for paying incoming bills.
In this month’s deal, Congress voted to suspend the debt ceiling until Dec. 8. What that means is that the debt ceiling, previously set at $19.8 trillion, is temporarily disregarded, and the debt is allowed to rise as needed to pay for all the bills Congress has racked up. When the debt ceiling is reinstated on Dec. 8, it will be reset at whatever level the debt has risen to by then.
Congress doesn’t have to immediately vote to raise it then, however. The Treasury has the ability to shift around government accounts to free up debt under the limit by, for instance, temporarily stiffing government employee pension funds of Treasury bonds.
Treasury Secretary Steven Mnuchin met Republican leaders at the Capitol for a closed-door meeting to discuss the tax code overhaul. (AP Photo)
Such “extraordinary measures,” as they’re known, for maneuvering around the debt ceiling have been frequently employed over the decades, and by now, Treasury officials can guess how long they’ll last. Eventually, however, all the options will be used up, and Mnuchin will have only incoming tax revenues with which to pay incoming bills. And at some point, the government will face the risk of being unable to pay all bills in full and on time, a prospect that would likely cause panic in financial markets.
At that point, Republicans who worry about the debt could force the party to confront Trump. Congressional Republican leadership will have to make the same kinds of difficult coalition-management choices that eventually led to the ouster of former House Speaker John Boehner.
For now, that reckoning is in abeyance. The early-September fiscal deal, which provided relief for flood victims in Houston, funded the government, and suspended the debt ceiling, came together too fast and contained too many different urgent measures to provide clarity about the political motivations of the White House that put it together.
It prevented a government shutdown, allowing the administration to suggest that it freed up time to legislate tax reform. It funded the military under fiscal 2017 levels through a continuing resolution. Most importantly, however, it responded to the crisis of the day, namely the damage from Hurricane Harvey in Houston and the imminent danger posed by Hurricane Irma to Florida.
Those factors, combined, were enough to earn votes from a majority of Republicans in the House and Senate. Without them, the outcome might have been different.
“I would have been interested to know the Treasury secretary’s strategy had those hurricanes not popped up,” said Rep. Mark Walker, the North Carolina Republican who chairs the Republican Study Committee, a caucus of conservatives in the House of Representatives.
In an interview in his House office, Walker issued a strong defense of tying debt ceiling votes to government reforms as a matter of saving the country from a debt disaster.
The second-term congressman acknowledged that the debt ceiling is a “crude” instrument for the kinds of reforms conservatives want. It’s not a constraint on spending. Rather, it is a limit on the debt that the Treasury can issue to pay the government’s bills. In other words, suspending the debt ceiling is not what is causing the federal debt to rise inexorably. The blame for that instead belongs to the votes that Congress has taken over the years to implement new spending without offsetting cuts elsewhere or tax hikes.
In Walker’s estimation, Congress has historically used votes to suspend the debt ceiling as an opportunity to enact new reforms. Those reforms have served as a sort of an acknowledgment that while balancing the budget is not possible overnight, changes are needed in the long term to prevent the debt from rising too fast.
And sometimes, they are effective in lowering federal spending. In 2011, controlling only the House of Representatives, Republicans leveraged a debt ceiling vote into spending caps and the “sequester” that ultimately drove down government spending.
Given the situation with Democrats, who favor greater stimulus spending, the 2011 deal was a great one for Republicans. Grover Norquist, the anti-tax activist and president of Americans for Tax Reform, would later call the sequester the “huge crown jewel” of the Tea Party.
Missed opportunity
“Is [Trump] annoyed at Republican leadership? Yeah, I think he probably is,” OMB Director Mick Mulvaney said after the debt limit deal was struck.
With the national debt hitting $20 trillion this month, though, many conservative members of Congress are increasingly agitated that they are not implementing bigger reforms, or skipping reforms altogether.
“This debt crisis is well past the tipping point and it is directly impacting our ability to fund our priorities,” said Republican Sen. David Perdue of Georgia, a debt hawk, on the news of the $20 trillion milestone.
In early September, Walker gave House Speaker Paul Ryan a list of 19 different reforms that members of his caucus wanted in return for suspending the debt ceiling. The proposals ranged from repealing Obamacare or instituting a balanced budget amendment to making the earmark ban permanent.
Republicans did not get any of them when, instead, Trump reached an agreement with minority leaders Rep. Nancy Pelosi and Sen. Chuck Schumer, and the bulk of Democrats voted to suspend the debt ceiling. Walker and 89 other Republicans voted “no.”
The question Walker was left to mull over as he returned to his central North Carolina district over the weekend was whether the next round would be the same. Would Trump work with Democrats again?
“Is this just a one-time way that the president was thinking to send all of the Republicans a message?” Walker wondered. “Or is this going to be a pattern?”
There are good reasons to think that Trump sided with Democrats in order to send a message to congressional Republicans who have struggled to pass their shared agenda items. The best is that his budget director said so.
“Is he annoyed at Republican leadership? Yeah, I think he probably is,” Office and Management Budget director Mick Mulvaney said on Fox Business after the deal was struck, citing Republicans’ failure to repeal Obamacare.
Mulvaney has particular cachet with conservatives in the House, as he was recently one of them. Before taking his current job, the budget hawk was a member of the House Freedom Caucus, the group of representatives who have routinely defied leadership to seek a more aggressive approach to spending.
Even within the administration, Mulvaney has called for combining reforms with a debt ceiling increase, disagreeing with Mnuchin, who wanted a clean hike. Now, though, Mulvaney has been sidelined on the issue.
Although many conservatives maintain faith in Mulvaney, some are starting to doubt.
“Mulvaney has really drank the Kool-Aid,” said Veronique de Rugy, a researcher at the libertarian Mercatus Center and a prominent advocate of fiscal conservatism. “The Mulvaney of the White House is not the same Mulvaney of the House Freedom Caucus.
A bad precedent
“Theres no emphasis on long-term fiscal reforms coming out of anywhere right now. The House, the White House, etc.” said Rep. Dave Brat of Virginia. “That is concerning.”
More generally, some of the most conservative members of Congress are worried over how the first big fiscal showdown of the Trump era ended the way it did.
“It sets a terrible precedent, right?” said Rep. Dave Brat of Virginia, a member of the House Freedom Caucus. “We wouldn’t put a clean debt ceiling increase on President Obama’s desk. And so, we put it on a Republican president … it’s not good.
“There’s no emphasis on long-term fiscal reforms coming out of anywhere right now. The House, the White House, etc.” Brat added. “That is concerning.”
Fiscal hawks see a few reasons that the urgency for addressing the federal debt has waned.
One is that annual deficits have declined. During Obama’s early years, when social programs were burdened by unemployed families and Democrats pursued stimulus spending, the annual shortfalls eclipsed $1 trillion. In recent years, the deficit has come in closer to $500 billion, easing some of the public fear over the government’s finances even though deficits are projected to rise again in the future.
Perhaps the greater factor, though, is that Obama is no longer in the White House. Some of Republicans’ supposed fiscal probity during the Obama years may have really been opposition to a Democrat.
“Republicans saw an opportunity to put the screws to the president,” said Andy Roth, vice president of government affairs at the Club for Growth, a fiscal conservative group.
The Club grew in prominence during the President George W. Bush years when many spending-conscious Republicans grew tired of the national party voting for some of Bush’s expensive priorities. Now, it is again contemplating having to return to that role.
“Trump cannot continue to side with the Democrats and not believe there won’t be a political cost to that,” Roth said.
The flip side of conservatives being on the defensive is that liberals are now on the offensive.
Rep. Luis Gutierrez, an Illinois Democrat, said in the aftermath of the debt deal that liberal Democrats would support a shutdown in December if Congress did not pass legislation providing a solution to protect young illegal immigrants from deportation.
Trump gave Congress a six-month deadline to find a solution for children of immigrants who came to the U.S. illegally. That timeline creates the possibility that Congress may be grasping for a political resolution to the immigration mess at the same time the Treasury needs the debt ceiling suspended again.
“In terms of the way that Republicans think about these various deadlines, they have to understand that Democrats are no longer saying these should be done without drama,” said Dan Holler, the vice president of Heritage Action, a conservative group.
If Trump and Republicans do not stick together by requiring reforms with debt ceiling votes, Holler said, “they’re ceding these leverage points to Democrats.”
The next round
Republican leaders projected calm in the aftermath of Trumps deal cut with House Minority Leader Nancy Pelosi and Senate Minority Leader Chuck Schumer. Senate Majority Leader Mitch McConnell simply brushed off the suggestion of eliminating the debt ceiling.
It would be very difficult, though, for fiscal conservatives in particular to stake out disagreement with Trump over the debt ceiling. In many conservative members’ red-state districts, Trump remains highly popular.
Walker himself said that he had to talk through his views of the debt ceiling deal the weekend after in a meeting with a few hundred members of a Republican women’s club who were strongly pro-Trump. Walker said he will continue to pursue fiscal responsibility via the debt ceiling regardless of the president. “When we’re asked to look the other way with a wink and a nod, we’re not going to do that,” he said.
Part of the Trump phenomenon, though, is that he maintains close connections with representatives of districts where he’s popular, despite not fitting the mold of a long-time free-market conservative. Rep. Mark Meadows, the chairman of the House Freedom Caucus, said he has no concerns about a repeat of the reform-free debt ceiling vote. Why? Simply because Trump told him personally that the episode was not a precedent for his future dealmakings with Congress. “I’m taking him at his word that it’s not the start of a new trend,” the North Carolina Republican said.
Meadows outlined two possibilities for Republicans to stick together on the next debt ceiling vote.
The first would be to include an increase in the debt ceiling to a GOP measure passing via reconciliation, the budget procedure that allows bills to pass without facing a filibuster in the Senate. Republicans have sought to replace Obamacare and pass tax reform using reconciliation.
The other would be to combine a debt ceiling vote with another piece of must-pass legislation, such as government funding, written on GOP terms, and dare Democrats to vote against it.
Republican leaders projected calm in the aftermath of Trump’s deal cut with Pelosi and Schumer. Senate Majority Leader Mitch McConnell simply brushed off the suggestion of eliminating the debt ceiling. House Speaker Paul Ryan dismissed the possibility that it could be the start of a realignment.
“Don’t you want our leaders to talk to each other on the other side of the aisle?” he said in an interview with the Associated Press. “There was no principle violated” in the deal with Democrats.
Nevertheless, they have to know that another major deal on fiscal policy between Trump and Democrats would put their roles in an even more precarious position.
“I don’t think that’s where Republican leadership or this administration. I don’t think that’s how they want to do business,” Walker said.
The next time the debt ceiling needs to be suspended, he warned, “my prediction would be there will either be reforms attached to it — or this will go down.”
