As the 112th Congress begins its work this month, it must take up some unavoidable unfinished business left behind by its predecessor. In their frantic, sloppy struggle to advance big-ticket items on the liberal agenda, the Democratic leaders of the 111th Congress not only failed to produce a budget for the current fiscal year, they also failed to address the fact that the federal borrowing necessary to fund their spending binge was quickly nearing the legal debt limit.
That means the new Congress, with a Republican House and a narrowly Democratic Senate, must pass an appropriations measure for the rest of the fiscal year by early March, when the temporary continuing resolution now in effect runs out. And it means the new Congress must raise the debt ceiling—to allow for federal borrowing necessary to cover expenses already incurred by President Obama and the last Congress, regardless of what the new Congress does about spending.
On their face, these hardly seem like ideal conditions in which to begin reining in government. But if Republicans resist the urge to deny the reality of these circumstances, and instead seek ways to turn them into opportunities to advance their agenda, they might find that they have quite a strong hand after all.
If Republicans are not careful, both the budget and debt-limit debates threaten to devolve into games of chicken in which each side tries to blame the other for failing to avert a government shutdown (if not a default on America’s debt). In such a confrontation, President Obama would have the advantage. He and his party have nothing to lose from a government shutdown. The public knows that the Democrats, as the party of big government, do not desire a shutdown, and so would blame the impasse on Republicans. Concern over absent government services and benefits, undoubtedly magnified by the press, would create pressure that, over time, would divide the Republicans but unite the Democrats. Obama could let such an impasse continue indefinitely, and would gain from every passing day, as Bill Clinton did in 1995.
Furthermore, if the debt ceiling, and not just the budget, is at the heart of the showdown, the costs will be not just political but economic. The Treasury could, for a time, move money around the various government trust funds to avoid actually hitting the debt limit—though such moves, especially if they involve Social Security or Medicare, would be politically unpopular. But within a few months at most, the government would be unable to repay existing debt and interest and would confront default.
The exact implications of this are hard to predict. But none of them are good. The Treasury probably would have to prioritize debt repayment and entitlement checks and arbitrarily slash other spending, all while turning away potential lenders, unnerving the bond markets, and sending interest rates upward—thereby increasing the cost of our debt even more.
None of this is what our ailing economy needs as it struggles to recover, and none of it is what the voting public wants to see. It would all inevitably end with Congress raising the debt ceiling (as Republican and Democratic Congresses have done ten times in just the last decade), but on terms far less friendly to Republicans, who will have used up a great deal of political momentum and capital for naught.
It is easy to understand the frustration of Republicans confronted with the task of cleaning up after the Democrats’ orgy of spending. They want to get right into the work of restraining government excess and unleashing growth. A vote for raising the debt limit—however inescapable the necessity—feels too much like acquiescence in the binge they were elected to end.
But it need not be. Rather than revolt against the circumstances they have been handed, Republicans in Congress should turn these Democratic loose ends into opportunities to begin changing the spending culture of Washington, and to strengthen their position in the bigger fights to come this year.
The 2010 election has given Republicans a stronger bargaining position, but it has not made them supreme in Washington. They have the power to stand athwart any further lurches toward European-style social democracy, and they will surely do so. The hyperactive period of the Obama presidency is over. The question for Republicans is whether their situation—controlling the House but not the Senate or the White House—also allows them to advance a positive agenda of their own, while persuading the public to give them the power to do more in 2012. The answer is surely yes, if Republicans use their improved bargaining position wisely and reinforce rather than deflate the public mood that got them here.