At Least Free the Debt Ceiling Hostage

Today’s X-Date PM: If the White House is so interested in a bipartisan deal, it should include a mechanism to end these crises permanently.

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With the White House’s contestation of the only preemptive legal resolution to the debt ceiling crisis, I think we can put the idea of unilateral action at least on the back burner, if not in the garage. The administration has put itself in the position of negotiating with legislative terrorists. And the House GOP has been refreshingly clear on this point by calling themselves legislative terrorists, through their actions and explicitly with their words.

A four-page ransom note out this morning from Freedom Caucus Rep. Chip Roy (R-TX) essentially demands everything in the Limit, Save, Grow Act, which passed by the skin of its teeth in the House in April. “My conservative colleagues for the most part support Limit, Save, Grow,” blurted out Rep. Matt Gaetz (R-FL), “and they don’t feel like we should negotiate with our hostage.” A finer distillation of the Republican position could not be found. They found something valuable and they’re going to get as much for it as possible.

What’s the Democratic position? This statement, which got a retweet from the White House messaging operation, is a good summary. They’ve talked themselves into freezing discretionary spending at current levels (the Goldilocks position in between the White House budget’s increases and the GOP’s cuts); the actual White House offer was a freeze of FY2024 spending at FY2023 levels, and a 1 percent increase for FY2025. The GOP wants to roll this back to FY2022 levels and keep the 1 percent cap for ten years, though that’s been softened to six. Even the White House plan would be a real cut in spending from the current baseline by over $1 trillion over the next decade.

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Democratic House Leader Rep. Hakeem Jeffries (D-NY) added that “Dem priorities need to be included in order to win Dem votes on the floor.” The working assumption is that as many as 100 House Democrats would be needed for passage.

Let’s sit for a minute and consider the insanity of this. The far right is openly hijacking the global economy, and everyone knows that none of the intellectual thought leaders of the enterprise, the guys holding the metaphorical box cutters, are going to vote for the bounty they receive!

I didn’t make that decision, but clearly that’s where we’re headed. So the question is, what “Dem priorities” are going to be included? If you ask House Republicans, well, none of them. “Asked Tuesday evening what Republicans were offering to get Democratic votes, Rep. Patrick T. McHenry (R-N.C.) gave a brief answer: ‘The debt ceiling,’” Jeff Stein reported in The Washington Post. Rep. Garret Graves (R-LA), who with McHenry is in the negotiating room, agreed. “That’s what they’re getting,” he said.

Indeed, Republicans have rejected numerous tax increases, loophole closures, and increases in drug price reform. They’re not interested in giving an inch, and given that they’ve got the White House to effectively agree that there’s no alternative but a deal, why should they?

But this is an impossible circle to square. Republicans get trillions in spending cuts, Democrats get “the debt ceiling” and nothing else, yet 100 Democrats have to vote for it. That would be political suicide for Democrats with their base. Is there even a possible solution here?

One answer has a nickname: the Gephardt rule.

In 1979, Dick Gephardt had a problem. His job was to whip votes in the House for an increase in the debt ceiling, and the majority Democrats didn’t want to do it. So he came up with a solution. Every time Congress passed a budget, it would include a joint resolution deeming the debt ceiling raised to the level necessary to cover the shortfall in that budget. The idea was simple: If Congress votes appropriations in, that is the logical time to increase the debt ceiling to ensure that those bills will be paid.

The Gephardt rule was only in place for the House, but from 1979 to 1995, it created 15 joint resolutions to raise the debt ceiling. The Senate concurred with about half of them. The Gingrich House suspended and repealed the Gephardt rule during Clinton, then reinstated it in the Bush years, and then the Tea Party House repealed it again under Obama.

Obviously, when it’s just a House rule, it’s simple to move it in or out depending on political strategy. But if it’s a statute, binding on the House and the Senate, then the debt ceiling can be blunted as a political weapon.

In reality, that’s the bare-minimum ask here. Republicans have said that Democrats will get nothing but the debt ceiling. They are engaged in an extortion effort. Well, in most hostage situations I’m familiar with, successful resolutions end with releasing the hostage. They don’t end with the hostage being released for a year or two, only to be sent back zip-tied into the captors’ basement once more.

That’s what Republicans want to do. They want to get their pound of flesh from this negotiation, and reserve the right to get another pound of flesh later, and again still later. That should be completely unacceptable. If we’re doing a negotiation (which certainly isn’t my first preference), it should end with a permanent dissolution of the debt ceiling as a tool, or at least as permanent as you can get. Nobody can bind future Congresses, but codifying the Gephardt rule would put Republicans in the difficult position of having to affirmatively pass the mechanism for an extortion attempt.

This would deliver significant economic benefits. Just the threat of a debt default raises U.S. borrowing costs and dampens investment. The 2011 near-default caused a $2.4 trillion hit to the stock market, by one estimate, to say nothing of higher interest payments. Removing the possibility of chronic default crises is probably the only thing that would re-instill investor confidence.

Republicans will resist this as fully as they would anything else. But Democrats have not rallied around a single ask. They have made these minor offers about tax loopholes or drug prices, really as a fig leaf so they can sell it to their caucus and their base. That’s not going to work; ending carried interest or something isn’t going to make anyone forget about trillions in spending cuts. The real tax fight, when the Trump tax cuts expire in 2025 and $3.5 trillion in revenues can be restored, will come later anyway.

In the context of this hostage situation, the appropriate ask is to release the hostage, forever. No Democrat should agree to anything without that as the bare minimum. The deal is distasteful, but if it’s the last deal, the taste gets a little less bitter.

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