Turning Points

The debt-ceiling fight did not have to go down like this. Along the way, any number of political actors, from the president to congressional Democrats, had the ability to defuse the bomb with which Republicans held the nation's creditworthiness hostage. Here are five missed chances to change the dynamic.

OBAMA AND DEMOCRATS COULD HAVE FIXED THE ECONOMY. While this sounds pie-in-the-sky, there's actually a pretty simple solution to our economic woes. It involves higher near-term deficits, particularly spending to create jobs. The Obama administration admitted that it underestimated the extent of the recession, and last Friday's report on gross domestic product from 2007 to present underlines the severity of the downturn. The stimulus package worked but was too small to counter the devastation caused by the financial crisis. If a Democratic Congress had approved a second stimulus plan -- a $154 billion jobs bill passed the House in late 2009, when the Senate had 60 Democratic votes -- the recovery could have been more robust. Instead, Democrats passed very small measures throughout late 2009 and 2010, none of which came close to the effort needed to truly boost the economy. What does this have to do with the debt ceiling? Political-science research shows a tight relationship between economic and electoral performance. A Democratic Party that markedly improved the economy in 2009–2010 would have been less susceptible to a Tea Party–led backlash. It may have held on to the House in the 2010 elections. That would have eliminated the possibility of a hijack attempt like the one we're seeing now.

THEY COULD HAVE INCLUDED THE DEBT LIMIT IN THE 2010 TAX DEAL. There was only one point in the last two years that Democrats had something Republicans wanted. At the end of 2010, the Bush tax cuts were due to expire, and Republicans were desperate to see them extended. In the lame-duck session, the president and congressional Republicans reached a deal for a two-year extension, with several stimulus measures, mostly on the tax side, included.

By that point, the president knew that he would be facing an uncompromising Republican House, one which would demand deep spending cuts for the next two years and would use any method at its disposal, including the debt ceiling, to force an agenda through a divided government. The president and Democrats could have pre-empted this by demanding a large increase in the debt ceiling as part of the tax extension and threatening to allow all the Bush tax cuts to expire if no deal was reached.

There's no guarantee Republicans would have accepted this. Democrats, though, never even offered it. Senate Majority Leader Harry Reid said he wanted Republicans to "have some buy-in on the debt," so their members would have to deal with the traditionally tough vote to raise the debt ceiling. That calculation could rank, as Felix Salmon put it, "very highly in the annals of tactical own-goals."

THEY COULD HAVE REFUSED TO AGREE WITH THE PREMISE. Underlying the entire deficit debate is a belief, relentlessly pushed by Republicans, that America has a massive debt crisis that will burden our children and grandchildren and crush us underfoot. The path forward, the GOP says, is to slash spending and provide confidence for the business community to invest and create jobs.

None of this is true. But Democrats have basically accepted this premise. Since the beginning of the Tea Party–influenced 112th Congress, Democrats have attempted to outflank the opposition with more and more fiscal austerity. As a result, the debate has moved far to the right in rhetoric and substance. Balanced deficit-reduction solutions have given way to all-cuts solutions. The (correct) idea that the economy cannot support a contraction in government spending right now has been dead and buried. A clean debt-ceiling increase, which has been done routinely under presidents of both parties for decades, was quickly pushed off the table.

President Obama didn't just embrace deficit reduction; he doubled down on it by seeking a $4 trillion "grand bargain" with Republicans to cut spending and entitlements and raise a pittance of revenue. The hostage became the hostage-taker, even denying relatively clean debt-ceiling proposals like Senate Minority Leader Mitch McConnell's, in pursuit of his big plan. In so doing, the president yoked a very risky and delicate deficit-reduction deal, which was doomed to fail on a variety of fronts, to a routine increase in the debt ceiling, which has grave consequences if it fails. The two should never have been tied together.

THEY COULD HAVE MADE CREDIBLE THREATS. The Constitution and federal statutes actually offer multiple escape hatches for the possibility of Congress failing to increase the debt ceiling. Section 4 of the 14th Amendment states that "the validity of the public debt of the United States ... shall not be questioned." Many legal scholars believe that this gives the president an avenue by which he can ignore the debt ceiling; a look at the legislative history of the 14th Amendment shows that this section was designed to "remove threats of default on federal debts from partisan struggle." Case law from the Supreme Court bolsters this interpretation.

That's not the only option. The Treasury Department has the authority by statute to mint platinum coins of any denomination without the input of Congress. Treasury could legally mint two $1 trillion coins and deposit them in its account at the Federal Reserve, paying bills off the proceeds. What's more, the president could simply highlight the contradictory demands Congress has made upon him -- to appropriate funds without floating new debt -- and decide that the debt ceiling must be unconstitutional as applied to the current circumstances, because it forces him to break the law.

A number of elegant solutions exist. The president, though, has been resistant to even hint at these options. A credible threat could have forced Republicans to back down, because the consequences of not raising the debt ceiling would then be negated. There would be political repercussions to choosing these extraordinary measures, but the president could have framed it by setting a deadline for action; otherwise, he would be forced to act unilaterally. The public could have gotten behind strong leadership to avert a self-induced crisis.

THEY COULD HAVE INVOLVED THE PUBLIC EARLIER. In a July 25 address from the White House, President Obama appealed to the American people to make their voices heard in this debate. "If you want a balanced approach to reducing the deficit, let your member of Congress know," Obama said. "If you believe we can solve this through compromise, send that message."

The president still inspires a degree of loyalty, as evidenced by the overwhelming response to his call to action, which shut down congressional switchboards and e-mail accounts. However, he gave them a drastically narrow set of choices. He also didn't ask them for help until July 25, with one week to go. There was an opportunity to involve them much earlier in the debate, to organize for a better deal, to use them as a grassroots ally in the legislative process.

None of these options are silver bullets -- all carry a degree of risk or potential for failure. Compared to where we are, though, they could hardly have delivered worse results.

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