Donald Dossier: King of Debt
WHY YOU SHOULD CARE
Because this debt ceiling showdown could be the worst one yet.
By Daniel Malloy
Washington’s least favorite vote is approaching yet again: the century-old concept of the debt limit, which requires Congress to vote to borrow money it has already voted to spend. President Donald Trump has mused about getting rid of the idea entirely, as many of his predecessors surely wished to.
Still, the law persists, with borrowing currently capped at $22 trillion. And we’re screaming toward a catastrophe that is not generating enough alarm … yet.
America has something to fight about every day with Trump, of course. And this week was all about the will-he-or-won’t-he game on imposing tariffs on Mexican goods. He didn’t, but the debt limit is a far more serious game. The clock is ticking, with the U.S. Treasury Department already using “extraordinary measures” to avoid not paying out its obligations on time and an estimated date of default around late October or early November.
The closest analogue to what we’re going through now was the fateful summer of 2011, when President Barack Obama and House Speaker John Boehner tried, in secret, to negotiate a “grand bargain” of spending reductions and tax increases to get the country on a better fiscal course. The deal never came together, but the debt ceiling was raised on the last possible day — which still rattled markets and caused a ding on the U.S. credit rating — based on the promise of a special deficit reduction committee in Congress. When the “super committee” predictably failed, in came severe automatic cuts to defense and domestic spending that Congress had spent the past few years regularly reversing.
It was a fiasco. Michael Steel, a top aide to Boehner at the time, saw it up close. And he says this debt ceiling fight is even more dangerous.
The biggest question mark is Trump.
In 2011, Steel says, Boehner at least had a clear strategy heading into the talks: a cut in federal spending commensurate with the increase in the debt. And, most important, all the top leaders involved agreed that a default was “unthinkable.” “I worry that that’s not the case today,” says Steel, now a partner at public affairs consulting firm Hamilton Place Strategies.
That’s in part because Trump’s chief of staff, Mick Mulvaney, was one of the biggest thorns in Boehner’s side in 2011 — the South Carolinian was part of the clutch of proudly antagonistic Tea Party lawmakers who wanted to slash the government any way they could. When asked in 2011 on Fox News whether he would vote to raise the debt ceiling or risk what experts were calling “Armageddon,” Mulvaney replied: “It’s no more Armageddon and no more catastrophic than what we’re doing right now — spending, what, $1.5 trillion we don’t have this year.”
In this fight, Mulvaney is reportedly trying to negotiate a return to those automatic spending cuts, while Treasury Secretary Steven Mnuchin has said Congress should pass a “clean” debt limit hike with no strings attached. Both positions are fantasy, Steel says.
The likely way out, which Senate Majority Leader Mitch McConnell says he’s working on, is a two-year deal to avoid those spending cuts and hike the debt ceiling through the next election. House Democrats lack a coherent position here too: They’d like to extract something for their debt limit votes — which always present an easy political piñata for opponents — but the details are fuzzy.
The biggest question mark is Trump.
He seems more suited to Mnuchin’s “let’s get this over with” than the Mulvaney “cut, cut, cut” perspective, particularly when the economy looks shakier by the day amid the multifront trade war and a rough jobs report on Friday. Nothing would rattle markets and consumer confidence like questioning the full faith and credit of the United States.
At the same time, the president has shown little interest in working with Democrats in any form as long as impeachment is hanging out there — and the impeach-o-meter continues to rise. (The latest drama, briefly: House Judiciary Committee Chairman Jerry Nadler reportedly wants to do it, Pelosi doesn’t but wants to see Trump in jail, center-left magazines are arguing that impeaching Bill Clinton didn’t really backfire on Republicans.)
So there’s no mutual trust and no clear agenda from some of the major players, who have already managed to produce the longest government shutdown in history this year.
Maybe if Trump floats tying the debt ceiling vote to a border wall, then people will start paying attention.