Congress must repeal the debt limit so no party can take it hostage
© Greg Nash

Treasury Secretary Steven Mnuchin has a problem. He knows that President Trump and the Republican-controlled Congress must pass a debt limit increase to avoid the catastrophe of defaulting on the national debt. But the Trump administration has sent mixed signals about how to handle the debt limit, and congressional Republicans are divided on the issue.

It is hard to imagine a more egregious unforced error than defaulting on the national debt when the same party controls the House, Senate and White House — and hard to imagine anything more absurd than expecting the minority party to make policy concessions to help the governing party avoid default. Ultimately, the whole situation shows the need for a permanent repeal of the debt limit so that it can no longer be taken hostage by anyone — regardless of which party is in charge.

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To be clear, raising the debt limit does not authorize new government spending. It simply ensures that the federal government will honor its existing commitments. If the government suddenly fails to make payments that it is required to make under law, the loss of confidence in the United States could spark a financial crisis and widespread job losses. As Secretary Mnuchin’s Treasury Department has explained, “Failing to increase the debt limit would have catastrophic economic consequences.”

 

Prioritizing interest on Treasury bonds over other federal obligations — as some members of the House Freedom Caucus have proposed — would not prevent default. The federal government has passed laws or signed contracts committing to pay military and civilian salaries, Social Security benefits, and payments to hospitals for Medicare services, to give just three examples. Defaulting on any of these commitments would call into question every financial commitment made by the United States, with disastrous economic consequences.

It is the responsibility of the governing party to raise the debt limit. President Obama made the public case for raising the debt limit when needed during his term. Democrats provided the bulk of the votes in Congress to raise the debt limit under President Obama. It is now President Trump’s job to push for a debt limit increase, and for the Republicans who control Congress to deliver the bulk of the votes.

Some Republicans — such as the House Freedom Caucus and White House budget director Mick Mulvaney — have bizarrely demanded massive spending cuts or repeal of the Affordable Care Act in exchange for avoiding default. If Trump and other Republicans kowtow to this faction, the governing party will be taking its own government hostage. There is no reason for the minority party to make even the slightest concession to bail out the governing party for its failure to govern.

Ultimately, Secretary Mnuchin must convince his colleagues in the Trump administration and the congressional majority to do their job and raise the debt limit, and it is becoming increasing clear that lawmakers must take steps to end debt limit brinksmanship once and for all. No one should be able to use the full faith and credit of the United States as a hostage to demand policy concessions — now or in the future.

Jason FurmanJason FurmanLook to Latinos to drive US economic growth Trump breaks federal rule about commenting on jobs report Congress must repeal the debt limit so no party can take it hostage MORE and Rohit Kumar, who were on opposite sides of debt limit negotiations as senior advisors to President Obama and Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellSenate passes 0B defense bill Overnight Health Care: New GOP ObamaCare repeal bill gains momentum Overnight Finance: CBO to release limited analysis of ObamaCare repeal bill | DOJ investigates Equifax stock sales | House weighs tougher rules for banks dealing with North Korea MORE (R-Ky.), respectively, have now come together to call for a permanent repeal of the debt limit. They point out that there are significant costs from the now routine “extraordinary measures” that are used when the United States is at the brink of default.

Even if the Republican-controlled Congress supports a debt limit increase for President Trump, Democrats have good reason to be worried that congressional Republicans will once again take the debt limit hostage under a future Democratic president. As Furman and Kumar recently wrote, “No matter which party holds the White House, all Americans would benefit from taking the threat of a U.S. default off the table.”

The United States nearly defaulted on the national debt when congressional Republicans tried to use the debt limit to extract policy concessions from President Obama. Under President Trump, Secretary Mnuchin’s warnings may not be enough to prevent a default that results from some combination of brinksmanship and mismanagement.

Stuart Varney, a conservative Fox News host, fumed that Republicans “can’t govern” after House leaders had to pull their healthcare bill in March. But when it comes to the debt limit, failing to govern is not an option.

Harry Stein is director of fiscal policy at the Center for American Progress. He previously served as a legislative assistant in the U.S. Senate, where his work included the federal budget and tax policy.


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