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Fight to the Debt

May 23, 2011, Vol. 16, No. 34 • By YUVAL LEVIN
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Normally in Washington, the agenda for spring and summer is set by the president’s budget and the priorities of congressional leaders. But this year will be different. House Republicans have proposed an ambitious platform, in the form of the budget produced by House Budget Committee chairman Paul Ryan and passed by the full House last month. But the Democrats who control the Senate and the White House, and who therefore effectively run things, have no discernible policy agenda. What substance there was in the president’s 2012 budget was emptied out by a bizarre speech he delivered last month, setting out completely different goals from those of his initial proposal but offering no specific means to achieve them. Senate Democrats, meanwhile, have been unable to agree on any budget outline at all.

Paul Ryan

Newscom

Instead, the course of the next few months will be set by a letter Treasury Secretary Timothy Geithner sent to congressional leaders three weeks ago, informing them that the government will likely hit its legal debt limit around August 2—a week before the beginning of Congress’s summer recess. Since neither party can afford to be seen as giving up too early in the fight over raising the debt ceiling, there is every reason to think that the argument will not be settled until the last possible minute. Geithner’s deadline suggests that the period from now until the August recess will be taken up almost exclusively with the debt-ceiling debate.

The general contours of that debate resemble those of the recently concluded struggle to avert a government shutdown over the 2011 budget. Republicans want to get as much in the way of spending cuts as they can in return for their votes, while Democrats want to give up as little spending as possible. And neither side wants to be blamed for a damaging impasse.

But the political dynamics are different. In the fight over the 2011 budget, Democrats could claim that they were merely trying to keep the government open by holding spending at its current level. Now they are asking for permission to borrow yet more money—a lot more. In order to avoid having to raise the ceiling again before the 2012 election, the administration will have to ask Congress for authority to add more than $2 trillion to the debt. That very large number makes this debate far more difficult for Democrats, and gives Republicans an opportunity to demand major concessions.

The question Republicans confront is how best to use the months over which this debate will take place. Republicans ought to build on what they have already achieved—namely, changing the conversation in Washington so that the need for significant spending cuts is taken for granted—while also making progress where they have so far done less well: actually enacting major cuts.

Last week, House speaker John Boehner made an excellent start. In a speech before the Economic Club of New York, Boehner said Republicans will insist on tying the amount by which the debt ceiling would be raised to the size of the associated budget cuts. Those cuts, he said, “should be greater than the accompanying increase in debt authority the president is given.” This strategy would highlight the scope of new borrowing required to fund the spending trajectory that Democrats want to sustain, and establish a sensible and easy-to-grasp principle for determining the size of the cuts Republicans will pursue. Voters will likely find it reasonable.

Boehner’s one-for-one rule also means that, in order to avoid another debt ceiling fight before Election Day, Democrats would have to agree to $2 trillion in cuts over the next five years (the period over which such cuts would have to be scored by the Congressional Budget Office, according to Boehner’s staff). House Republicans have just passed an outline for such cuts: The Ryan budget reduces federal spending by more than $1.8 trillion in its first five years. But Democrats are unlikely to stomach spending reductions on that scale, and so they will have to accept a smaller increase in the debt ceiling. Thus, Boehner’s strategy makes it likely that we will see yet another debt ceiling fight, with a further chance for cuts, before the 2012 elections.

Whatever the eventual level agreed to in this round of the debt ceiling match, Republicans should draw on the Ryan budget as they pursue particular cuts. Along with its cuts in domestic discretionary spending, Republicans could press for at least some portion of its Medicaid reform, which would block-grant the federal portion of Medicaid funding, giving the states far more flexibility to design their own programs and saving another $200 billion over five years and far more in the years beyond.

Republicans should also pursue the budget process reforms in the Ryan budget, including statutory caps on discretionary spending, binding caps on total federal spending as a percentage of GDP, and the transitioning of some mandatory spending into the regular appropriations process. This would be good policy and good politics. Some Democrats may even find it appealing.

The Ryan budget provides Republicans with a concrete policy agenda directed precisely to what the debt ceiling fight will require. The Democrats have no such agenda, giving Republicans an additional tactical edge. Rather than waste the opportunity on gimmicks and slogans, they should make the most of that advantage, and of the best opportunity they will have until next year’s election not only to change the conversation in Washington but to make real and lasting spending cuts in the federal budget.

—Yuval Levin

 

 

 

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