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Posted at 9:20 AM ET, 01/20/2011

Do the GOP debt-limit schemes make sense?

By Jennifer Rubin

Republicans are popping up with new schemes on the debt ceiling. They don't just want to extract big cuts in spending; they actually want to refuse to raise the debt ceiling. I asked James Capretta, a fellow at the Ethics and Public Policy Center and former associate director of the Office of Management and Budget (in charge of, among other things, health care) whether these ideas make sense. The short answer: not really.

First, the debate is "way premature," Capretta observes. The debt ceiling won't need to be raised until April, maybe as late as June, Capretta points out. In the meantime there will be the State of the Union address, the Republican House budget plan and lots of tussles. The debt ceiling fight is in essence putting the cart before the horse, making a threat without knowing the ground on which conservatives stand.

Second, Sen. Pat Toomey (R-Pa.) is correct that there is no firm statutory basis for deciding whether we pay bond holders (debt) first or other government obligations. So the administration was using scare tactics to declare that there would be an automatic default. (Tim Pawlenty has made the same argument.) But here's the kicker that Toomey points out:

If we do not raise it, the government's tax revenue will enable us to fund roughly two-thirds of projected expenditures, including interest payments. Without the ability to borrow the other third, spending cuts would be sudden and severe: Projects would be postponed, some vendor payments would be delayed, certain programs would be suspended, and many government employees might be furloughed. Default would easily be avoided, but these cuts would certainly be disruptive.

Capretta contends (and I heartily agree) that despite their vim and vigor, the House Republicans are not going to cut one-third of the government -- right now. That is why, despite all of the arguments for why we don't technically have to raise the debt limit, we really do. Toomey, I suspect, understands this: "Congress should make increasing our debt contingent on immediate cuts in spending and effective reforms of the spending process that helped get us into this mess." In the end he is simply calling for essentially what House Majority Leader Eric Cantor (R-Va.) is advocating.

Capretta points out that there is no "conceivable spending plan" out there to cut a third of the budget, so the best Republicans can do, following Toomey and Cantor, is to extract $50 billion to $100 billion in real cuts. (Today, Sen.Jim DeMint (R-S.C.) is out with a plan to cut $125B.) That would be a significant accomplishment.

Now that we have parsed the theatrics, what is ahead? Capretta recalls that in 1995, President Bill Clinton "counterpunched." He didn't actually roll out his own budget until midyear, vowing to be "fiscally conservative" but to do so in a way liberals liked (e.g. tax hikes, slashing defense). However, Capretta doesn't think that "Obama has the luxury of counterpunching." If he comes out at the State of the Union and says he wants fiscal discipline but "details to follow," Capretta argues, the public will recoil.

Instead, Capretta surmises that the Obama team (Jack Lew, Gene Sperling, etc.) is going to try to be fiscally conservative -- "the Democratic way." That entails health-care price controls ( the "double down on Obamacare" strategy," Capretta calls it), tax reforms that hike taxes on business and investors, a Social Security plan with massive tax increases, and big defense cuts.

What is wrong with all that? Well, it will strangle the economy, for one thing. It's not "fiscally responsible" to say, "Oh, we spent a trillion dollars but we raised a trillion and one dollars." That is a formula for squelching growth and jobs. Nevertheless, it might be -- if Capretta's take is correct -- exactly what Obama is up to.

What are the Republicans to do then? I'd suggest putting away the phony debt ceiling argument for a while. Begin to talk about the size and functions of government that are necessary. Start to explain the connection between taxes, debt and job growth. Then come out with a budget that doesn't scare the voters to death (as cutting spending by one-third certainly would), but that entails, Capretta suggests, real entitlement reform and actual spending cuts to be followed by multi-year freezes on discretionary spending. Frankly, Republicans should keep their eye on the ball -- and not the debt ceiling.

By Jennifer Rubin  | January 20, 2011; 9:20 AM ET
Categories:  Budget  
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Comments

Cut the federal government by one third! A dog can dream.

I would note that nothing in the constitution gives the government authority to pay money to people as "social security". Further article 1 gives no authority over medicine, education, housing, or agriculture. That would permit halving the federal budget, without touching essential federal functions.

Posted by: DonM2 | January 20, 2011 10:00 AM | Report abuse

This is a hoot.

"If he comes out at the State of the Union and says he wants fiscal discipline but "details to follow," Capretta argues, the public will recoil."

That's how the Republicans have been running for years. Make big claims and have no details.

Posted by: chucko2 | January 20, 2011 10:04 AM | Report abuse

Cut the federal government by one third! A dog can dream.

I would note that nothing in the constitution gives the government authority to pay money to people as "social security".
=========================

PROVE IT!!

IT is being done!!

Posted by: pdq5 | January 20, 2011 10:11 AM | Report abuse

This points out the glaring hypocrisy of the Republicans, particularly in the House, who have made great political hay about cutting spending, without any details. Their bluff has now been called. Put up, or shut up, Mr. Boehner.

Posted by: prevailedwinds | January 20, 2011 10:19 AM | Report abuse

Where are the Jobs?

Don't raise the Debt Ceiling! Default on Treasury Bonds owed China, Japan and destroy our ability to borrow any more money.

That will Tighten the Belt!

Posted by: ddoiron1 | January 20, 2011 10:51 AM | Report abuse

The expectations/aspirations of thr Right which fueled the congressional victory of 2010 is the accelerant that will allow Obama his 2ND term. Those expectations are being crushed,first by the compromises of the "lame duck",no actual repeal of Ocare,and soon,by the likely Republican compromise on the Debt ceiling. The fact of Conservative impotence after such a great electoral victory,is the new reality.
The worst thing that happened for Obama was his "unrealistic" victory in 2008. The best thing was the Republican victory in 2010. In today's politics,the losers either have the power to make changes,or are percieved/expected to make changes. The Senate is now designed to stop any changes unless somone has 61 likeminded votes. Our balance of powers system is now a Black Hole.

Posted by: rcaruth | January 20, 2011 10:52 AM | Report abuse

They're shadowboxing right now and laying the groundwork for the eventual negotiations. The battle will soon be joined with a great deal of specificity. The President gives the State of the Union in another week, followed closely, in the first week of February, by the President's budget submission. The House and Senate will have to advance their own budgets after that.

Republicans have every incentive to take a hard line now to induce additional concessions in the SOTU and budget. Those concessions will be pocketed (except maybe in defense) and more will be demanded. The trick for Republicans is to look strong now without locking themselves into a suicidal confrontation over the debt ceiling (the way Congress did in 1995-96).

In 1995, there was no model for a budget fight between a GOP Congress and a Democratic President -- the GOP hadn't held Congress in 40 years. In their zeal, they ended up stepping on some landmines. I'm hopeful (perhaps foolishly), they'll avoid this particular landmine this time.

Posted by: rodomontade | January 20, 2011 10:56 AM | Report abuse

In 1995, there was no model for a budget fight between a GOP Congress and a Democratic President -- the GOP hadn't held Congress in 40 years. In their zeal, they ended up stepping on some landmines. I'm hopeful (perhaps foolishly), they'll avoid this particular landmine this time.
Posted by: rodomontade

The GOP doesn't have Congress,just the House /Apples/Oranges

Posted by: rcaruth | January 20, 2011 11:06 AM | Report abuse

A well reasoned column Jennifer, that will get you in a lot of trouble with the pie in the sky Tea Party people.

Posted by: johnmarshall5446 | January 20, 2011 11:06 AM | Report abuse

rodo:

I like your post, but disagree with your conclusion. The ball is clearly in Obama's court. He has not yet shown the guts to stand up in a faceoff and hold his ground. So that's clearly not the way to bet. However if he does, the GOP loses 100% of the time, because they have made this one of the two pillars of their takevoer (repeal and obstruct healthcare being the other) that they will make these huge budget changes.

Posted by: johnmarshall5446 | January 20, 2011 11:13 AM | Report abuse

The talk about the debt ceiling and why it doesn't have to be raised is to counter Goolsby's doom and gloom scenario. The public, those who are paying attention, which means the tea party, need to see that the threat of default is phony. That gives the Republicans a valid threat to vote no. Now, negotiations can begin. I'm sure Boehner knows that and, I suspect, it is part of his strategy.

Posted by: mtkennedy | January 20, 2011 11:18 AM | Report abuse

Any attempt by Obama to raise taxes will be easily defeated and will hurt him politically. Spending will have to be cut. Defunding ObamaCare and pruning the bureaucracy are obvious places to start.

Posted by: eoniii | January 20, 2011 12:59 PM | Report abuse

GOP stands for Grand Ol' Posturers. They don't do anything substative. They just posture.

Posted by: tinyjab40 | January 20, 2011 1:38 PM | Report abuse

Cut the defense budget by half. That's enough to pretty much abolish the deficit, and it still leaves us spending more than three times as much as the world's second-largest military.

Stopping the wars of futility is enough to balance the budget. Maybe that's a better way than balancing the budget on the backs of the poor, the helpless, and the elderly poor.

Posted by: lonquest | January 20, 2011 1:38 PM | Report abuse

Congress trims budgets like little old ladies trimming roses. They call reducing the rate of increase a cut. I want to see some chainsaw clearcut budget cutting where whole government programs get eliminated. Maybe the House could set aside one day a week as Sacred Cow Barbecue Day where proposals to cut spending and eliminate tax breaks could bypass committees and go directly to the floor for an up or down vote. Take that mohair subsidy!

In addition to eliminating whole programs, the federal government could pay off some debt by selling off some of it's assets. I'd like to see some program to sell federal land structured similar to the base closing commission. There is a lot of federal land that could be sold.
http://bigthink.com/ideas/21343

Posted by: GeorgeB_TX | January 20, 2011 1:47 PM | Report abuse

Refusing to raise the debt ceiling could have some interesting effects. All government offices would close at home - no Social Security checks, no Medicare payments, no Federal Law enforcement. We would have military all over this country and all over the world; we could not keep thier bases open or feed them but we couldn't bring them home either. I remember movies of them walking home after the civil war; don't know how they would walk across the oceans. The comments you read and hear are laughable; people have limited grasp of reality.

Posted by: withersb | January 20, 2011 2:21 PM | Report abuse

rcaruth:

I know the Democrats hold the Senate. I don't think the situation is apples/oranges within the context of the discussion. My argument is that if the GOP engineers a government shutdown/crisis over the budget, they can be made to pay. I don't think Democratic control of the Senate will affect that at all. Everyone understands that a government run by Democrats would not shut down (short of total societal collapse).

Obviously, Democratic control of the Senate will have a large effect on the trajectory of the broader budget debate when compared to 1995-96.

johnmarshall4556:

I take it that you're arguing that the President will cave to GOP threats that can't be executed without catastrophic damage to the GOP. I think the President will propose some budget cuts in his current move to the center, but I doubt it'll be because of these threats.

I agree that the GOP will lose in a government shutdown situation. I don't necessarily agree if you mean the President can successfully take any position he wants on the budget and make the GOP eat it. The GOP doesn't necessarily lose as long as it fights hard, even if it is overwhelmed to some degree by the President and the Senate.

At a minimum, it would seem entirely feasible for the GOP to prevent budget increases simply by forcing the government to operate on a continuing resolution. That is what caused the actual drop in discretionary spending between fiscal year 1996 and 1997 -- the only one in decades.

Posted by: rodomontade | January 20, 2011 2:35 PM | Report abuse

rodo:

I agree that Obama has to present himself as reasonable. With Daley as COS, I don't think this will be a problem for him.

I think the continuig resolution won't be available, because it makes sense for the Dems to have a showdown now, rather than later.

Posted by: johnmarshall5446 | January 20, 2011 3:13 PM | Report abuse

The Obama administration has been wading through the stinking mess left behind by the last Republican administration for two years, and the wingnuts have long since decided that Obama himself caused the recession, lost the jobs, started the wars. After all, he is in charge. Well folks, now your team has the house it is your turn. Where's the jobs? Where's the jobs? Where's the jobs?

Posted by: gposner | January 20, 2011 3:20 PM | Report abuse

My argument is that if the GOP engineers a government shutdown/crisis over the budget, they can be made to pay.
Posted by: rodomontade

Rodo,John Boehner is far less ideologocally motivated than Gingrich was,JB is mainly interested in continuing the coctail parties and the golf outings. He's not going to piss off his party buddies, and until the Senate is run by MM,he is irrelevant. He can't get 60 votes on any issue.

Posted by: rcaruth | January 20, 2011 3:29 PM | Report abuse

johnmarshall5446:

Interesting. How do you anticipate the President would engineer such a showdown? Would he veto a continuing resolution with level funding because it doesn't spend enough, perhaps on health care? Or on what other priority? Is that a viable strategy? If the President makes it clear that he's the one willing to shut down the government, it would seem to me to alter the political dynamics.

My thinking has generally been that the GOP shutdown strategy of 1995/96 was an unforced error by the GOP. It is not clear to me that President Clinton then or President Obama now could force the same result without the GOP error. In other words, the punishment is based on a GOP overreach.

Posted by: rodomontade | January 20, 2011 3:29 PM | Report abuse

A Republican would jump off a cliff to save his ideology. I don't get it.

Posted by: danw1 | January 20, 2011 3:51 PM | Report abuse

My thinking has generally been that the GOP shutdown strategy of 1995/96 was an unforced error by the GOP. It is not clear to me that President Clinton then or President Obama now could force the same result without the GOP error. In other words, the punishment is based on a GOP overreach.
Posted by: rodomontade

Rodom,the GOP will cave on the Debt ceiling as they did on unemployment,the Democrats will cave on two more years of Bush tax cuts,and by everyone caving,nothing will have to be done on the deficits.

Posted by: rcaruth | January 20, 2011 4:11 PM | Report abuse

'If we do not raise it, the government's tax revenue will enable us to fund roughly two-thirds of projected expenditures, including interest payments. Without the ability to borrow the other third, spending cuts would be sudden and severe: Projects would be postponed, some vendor payments would be delayed, certain programs would be suspended, and many government employees might be furloughed. Default would easily be avoided, but these cuts would certainly be disruptive.'

That's not a bug, it' a feature! Eliminate all subsidies, tax credits and roll back federal salaries, entitlement payments, pensions to the 2004 level and eliminate the tax exempt and non profit exceptions to the income tax, repeal Davis-Bacon and ban government worker unions. Problem solved.

Posted by: cubanbob | January 20, 2011 4:13 PM | Report abuse

rcaruth:

I agree entirely that the bigger risk is too little fight from the GOP on the budget rather than too much. I am, I think, slightly more optimistic than you on the short term at least.

First, I think Boehner is pretty ideological, at least on spending. He was #3 in the leadership in 1995/96 under Gingrich and Armey and has a far better personal record on spending than the average Republican.

Second, and much more important, is that the political winds are blowing in the direction of greater fiscal restraint. I do not depend on politicians agreeing with me deep down in their empty, shriveled hearts; I depend on them being able to calculate their own self-interest. I suspect that the average GOP House member can figure out that he is utterly doomed if he backs down on either health care or spending in the current political environment.

Things can change, but I anticipate that we'll see some fight in this budget cycle. When the President proposes tax increases in his budget (as I suspect he will), the pressure will only ratchet up on the typical GOP member.

Posted by: rodomontade | January 20, 2011 5:02 PM | Report abuse

My error. Boehner was GOP conference chairman -- #4 in the leadership -- in 1995/96.

Posted by: rodomontade | January 20, 2011 5:18 PM | Report abuse

rodo:

No engineering necessary. The inexperience of the new people and the God-awful "leadership" of those like Michele Bachmann could carry the GOP right over the edge. Boehner doesn't impress me as having a strong personality, and so will probably get lost in the storm so to speak.

Posted by: johnmarshall5446 | January 20, 2011 5:30 PM | Report abuse

(1)Rodom/Second, and much more important, is that the political winds are blowing in the direction of greater fiscal restraint.

(1)Sure,as long as the Fiscal restraint lowers someone else's standard of living,not mine

(2) I suspect that the average GOP House member can figure out that he is utterly doomed if he backs down on either health care or spending in the current political environment.
(2)Sure Nuf,every Republican in Congress will vote against health care,and vote to defund it,but no bill relating to those activities will get to Obama's desk,so we have Kabuki theatre. Again as far as spending cuts,they will occur as long as nobody with influence is upset by them,therfore no spending cuts.

(3) When the President proposes tax increases in his budget (as I suspect he will), the pressure will only ratchet up on the typical GOP member
(3)It's Boehner's/MM's Budget,not Obama's,and we'll see no tax increase or spending cuts in it,but we will hear a ton of back and forth blame about deficits.

Posted by: rcaruth | January 20, 2011 5:38 PM | Report abuse

There's no one out there who want's Socialized Medicine and Obama out , more than I do. But Tiny Tears and the rest of the Republicats know it will be 2012 before that happens. Just as Obama and crew try to line the pockets of the Green and Gleen , and GM with it's Ethanol , everyone in Washington had better get after Obama to free up the Permits to drill here, on and off shore. I just paid $3:17 a gal for Heating oil yesterday and while they are trying to cut my Social Security and Medicare, they are putting me and everyone on a fixed income into the Poor House. Let's get with the Priorities . The " Now " things. Gas at the pump us over $3.00 as well . How the Hell can an American worker who is unemployed even get to a job interview when it costs so much to get there. This plus the new raises in Health Insurance won't make it any easier and it's so insane as benefits won't kick in until 2014 . That is if there is any benefits. I just heard a horror story from friends in England and if every Obama lover could hear it, I'm sure they would be able to see how he's scamming all of you. Socialized Medicine is not for Americans . We don't even want to wait in a line at the bank, let alone months to see a doctor. Have an infected tooth and suffer for months before you get a dentist to look at it . This is what you're in for as Obama played host to 30million while putting 270 million into a hole and took away their Insurance . Wake up America and pressure your legislators to get rid of this guy and his henchmen before it's too late. It worked last November in a fashion, and it can work again. Hey Beck, you want to hold another rally ? Well this time , don't make it a MLK lovein. Make it a March on Washington to rid the country of a Socialist, Communist , Muslim and then you'll be doing something worthwhile with all your preaching.

Posted by: puck-101 | January 20, 2011 5:52 PM | Report abuse

Make it a March on Washington to rid the country of a (1)Socialist, (2)Communist , (3)Muslim and then you'll be doing something worthwhile with all your preaching.
Posted by: puck-101

(1)What kind of a Socialist?
(2)Aha,a Communist Socialist,& what else?
(3)Aha,a Socialist Communist Muslim or is he a Socialist Communist who also,but unrelated to his SCism,happens to be a Muslim,but,AHA,is he a Black Muslim or a Jihadist Muslim,or worse case, A Black,SunniShiiteist,Jihadist,Alquadistic,Terrorist,Carloslike,Muslim,The Worst of the Breed?

Posted by: rcaruth | January 20, 2011 6:24 PM | Report abuse

rcaruth:

The President has to submit a budget. It's the law. Expect it the first week in February.

Posted by: rodomontade | January 20, 2011 6:53 PM | Report abuse

Start to explain the connection between taxes, debt and job growth

Well, we can start with the 90's, when Clinton raised taxes and employment and growth went through the roof, and then the 00's, when Bush lowered taxes and employment and growth went south. I'm sure there is a conservative explanation for this--bonus points if you claim all of the growth in the 90's was due to the Reagan tax cuts of the 80's. You lose your think tank job if you mention that growth was much higher in 1951-1980 (with a top marginal rate of 70-93%) than in 1981-2007 (even not including the Bush meltdown of the economy in 2008).

Until Republicans stop lying, this country has no hope.

Posted by: garbage1 | January 20, 2011 7:31 PM | Report abuse

No surprise, the GOP wants to wait and see if they can get back in the White House, then raise the debt ceiling, so they can go back to China and borrow and spend again.


Posted by: lindalovejones | January 20, 2011 7:42 PM | Report abuse

The largest factors driving the growth in the 90's were the invention and giveaway of the World Wide Web, the development of HTML and the Mosaic and Netscape web browsers, plus the continuing pace of microprocessor development ala Gresham's Law. And oh yeah, Microsoft.

Posted by: aardunza | January 20, 2011 10:48 PM | Report abuse

Hey, according to Mr. Boehner, abortion is the number one issue - and he's got his finger on the pulse of this country don't ya' know.

Mr. Boehner...where are the jobs???

Posted by: JilliB | January 20, 2011 10:53 PM | Report abuse

Oops, whatever that law concerning processor speeds was called.

Posted by: aardunza | January 20, 2011 11:06 PM | Report abuse


We do not need to cut the aid to people. We can cut the money going to the War Machine, which is only used for destruction, and use it to rebuild America.

Even better, we can have it all if we only get the Republicans to PAY FOR THEIR BUSH WARS!!

We could really use that $5,000,000,000,000 right now.

Posted by: gkam | January 21, 2011 11:51 AM | Report abuse

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