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Debtors Can Be Choosers

by Ramesh Ponnuru

Budget advice for the Republican leadership

Fifty-nine House Republicans voted against the budget to fund the government from April through September of this year. But many more of them, including some members of their leadership, know that the deal Speaker John Boehner’s office struck was a poor one. They voted for it for two main reasons: to avoid a government shutdown and to avoid weakening Boehner. Most of them like him personally. They consider him a fellow conservative who is doing the best he can, rather than a sell-out. Even among those 59 Republicans there were few critical remarks about the speaker — on or off the record.

But that affection goes only so far. As House Republicans enter their next budget battle, over raising the debt ceiling, a lesson an increasing number of them are drawing is that Boehner cannot negotiate for the whole conference. The debt-ceiling debate was always going to pose a challenge to the leaders of the House Republicans. They favor raising the debt ceiling because they do not want to impair the government’s credit and roil credit markets, because they know that their backers in the business and financial worlds strongly favor it, and because they know that almost nobody in America wants the kind of sudden, sharp changes that eliminating the deficit immediately would require. But the public does not favor an increase, and many conservatives are dead-set against it.

The leaders have sought to keep both Wall Street and conservatives happy by saying that they will vote to let the federal government borrow more money, but only if at the same time they get tough new spending cuts and reforms to the budget process. But there is not yet any consensus on what cuts and reforms, specifically, should be included. And the fallout from the budget deal has only made the leaders’ task harder. Any deal they make on the debt ceiling will encounter additional skepticism: Are the spending cuts real, or phony? Many conservatives concluded that a large proportion of the $38.5 billion in cuts supposedly achieved in the last deal were fake.

It appears that we are going to hit the debt ceiling by mid-summer at the latest, so Republicans do not have much time to decide what they want and start negotiating. And there’s another complication. In their opening bid, Republicans have to ask for more than the minimum they can accept. Otherwise, they’ll get less than they can accept. But to reach a deal they will have to abandon some of their demands. Which means the leadership will have to prepare backbench Republicans to live with the fallback position, without spelling out their strategy in public. This feature of large-group negotiations is exactly why it is so important for the group to trust its negotiators.

The first question conservatives who want a debt-ceiling deal ought to ask is what spending cuts or reforms are both meaningful and achievable. One suggestion that should be dismissed peremptorily is that the bill should be paired with a vote on a balanced-budget amendment to the Constitution. Leave aside the reasons for skepticism about the amendment’s substance. (Chief among them the question of its enforcement: Do we want to let judges raise taxes or decide where to cut spending? And if not, would the amendment be enforced at all?) The amendment, especially in its current form, which in addition to mandating a balanced budget requires a two-thirds majority of Congress to raise taxes, is not going to get the 67 necessary votes in the Senate, let alone overcome the other hurdles to formally changing the Constitution. Holding a vote on it would merely give Harry Reid a chance to let his vulnerable members feign fiscal conservatism.

Another idea is achievable but may not be meaningful: a law imposing automatic remedies if the government exceeds some target level for spending or for deficits. Sen. Bob Corker (R., Tenn.) has a plan to impose spending caps in this way. These schemes have been tried before, notably in the late 1980s, and Congress generally loosens the caps before spending cuts take place. Democrats ran the House and the Senate for almost all of that time, though, so Republicans might make the case that this time the caps would work. If they go down this route, Republicans should certainly pledge that as long as they control either chamber of Congress they will not lift the spending caps.

President Obama’s version of an automatic remedy — a “failsafe” that imposes both spending cuts and tax increases if deficits do not decline — would be especially vulnerable to nullification. If the failsafe ever threatened to come into effect, it is likely that a bipartisan majority would vote to prevent it: Republicans would vote to stop defense cuts and tax increases, Democrats to stop domestic-spending cuts.

Sen. Marco Rubio (R., Fla.) has set out his own version of a deal: “I will vote to defeat an increase in the debt limit unless it is the last one we ever authorize and is accompanied by a plan for fundamental tax reform, an overhaul of our regulatory structure, a cut to discretionary spending, a balanced-budget amendment, and reforms to save Social Security, Medicare, and Medicaid.” He is, in other words, going to oppose any increase unless it is tied to a larger portion of the conservative economic agenda than the last six Republican presidents achieved put together. And this mega-deal, recall, has to happen by mid-summer. Rubio is certainly right to suggest that Republicans should approach the debt-ceiling debate as part of a larger argument about government reform and economic growth. But to lay out goals this ambitious is to rationalize a “no” vote rather than to advance the prospects of a deal including conservative policies.

Grover Norquist, the influential anti-tax activist, thinks that Republicans should increase the debt limit a little bit at a time, getting concessions every time the limit approaches. The trouble with this approach is that it creates an opportunity for Democratic challengers to run ads saying that the incumbent Republicans “voted ten times to raise the debt limit.” No politician wants to have to respond to that criticism. That goes double for politicians who ran hard on opposing federal profligacy.

But Norquist may be on the right track. There probably isn’t enough time to reach the kind of deal conservatives should be seeking. So the best course may be to pass a small debt-limit increase that buys time to make a better deal — or to pass a large debt-limit increase that is contingent on reaching a deal by a specified time.

There are two arguments, apart from necessity, for this strategy. One is that it has history on its side: Previous debt-limit deals including reforms have followed short-term extensions. Washington does not achieve debt-limit deals on the first pass. A second is that it preempts what looks like President Obama’s strategy to avoid meaningful spending cuts and reforms. In mid-April he announced yet another bipartisan deficit commission. It seems tailor-made to enable Obama to announce in a few weeks that the commission is making progress and that Congress should enable further progress by raising the debt ceiling. Other than helping Obama get a higher debt ceiling, it is hard to see what the commission could achieve.

So, for example, an opening bid on a debt-limit increase could include five components. First, caps on discretionary spending set at the levels in Rep. Paul Ryan’s budget plan (which are lower than the ones Corker is seeking). Second, reductions in the federal workforce and in its benefits. Third, an end to some of the administration’s most onerous regulatory initiatives — which would help remind voters that jobs and growth are the point of this exercise. Fourth, a law ending government shutdowns: If the parties cannot agree on a bill to fund the government, there should be automatic spending cuts from the previous year’s level. Fifth, and most important, Medicaid reform. The debt-limit extension could stipulate that a law to save $750 billion from Medicaid over ten years must be passed by December, or the debt limit would again kick in.

Once the negotiations are over, Republicans should heed one more lesson from the recent budget deal: Don’t oversell your accomplishments. The House Republican leadership kept touting the “historic” nature of its deal with Obama, which grated on people familiar with the details. Then again, if Republicans drive a hard enough bargain, they won’t have to oversell it.

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