Former Senator Phil Gramm (R-TX) famously said, in his trademark Texas drawl,
Never take a hostage you’re not willing to shoot.
I heard him say this to a Republican colleague who had blocked a Clinton Administration nominee as leverage on an unrelated policy issue. The White House publicly confronted the hostage-taking Senator, who promptly folded. Gramm knew that, if you were going to make a legislative threat to block a bill or nominee, you needed to be willing to actually carry through with your threat (“shoot the hostage”). The other guy might call your bluff, and you needed to be willing to accept both responsibility for the policy damage caused by your action, as well as the associated political pain. And once you’re seen as an empty bluffer, your future threats have no power.
It appears that Senate Budget Committee Chairman may be making this mistake. The Washington Post reports,
Conrad is the leader of a group of Senate moderates threatening to block an increase in the debt limit unless Congress also votes to create a bipartisan task force on deficit reduction with broad powers to force tax increases or spending cuts through Congress.
If this report is accurate, then Senator Conrad is bluffing. If Leader Reid calls his bluff, neither Senator Conrad nor his colleagues will block an increase in the debt limit. Nor should they.
Having worked on too many debt limit increases to count, from both ends of Pennsylvania Avenue, I will claim the following are six rules of debt limit increase legislation:
- Treasury always says the debt limit must be increased by a certain date, and usually claims that date is a hard backstop, implying that the USG will default if the limit is not increased by that date.
- Treasury always has more cash management tricks it can use to push that hard date just a smidge farther.
- Some Senator almost always foolishly threatens to hold the debt limit increase bill, usually in an atttempt to gain leverage on some unrelated issue.
- At the end of the day, that hostage-taker always folds, and a clean debt limit increase passes. It is sometimes part of a larger bill, but the threat to block it always goes away if the demand is too great.
- The majority party has the responsibility for delivering the needed 51 votes to pass the bill. The minority gets a free ride, although sometimes the leaders will work together.
- Therefore, the debt limit increase always passes, although sometimes a few days late, forcing Treasury to dip into its bag of tricks. And the U.S. Government never defaults on Treasuries.
These are not the rules you’d like to govern the process. They’re ugly and messy. In an ideal world, Treasury wouldn’t have to dip into its bag of cash management tricks, each of which has increasingly harmful policy consequences, to buy a little more time for Congress to act.
But the end result has always been success, and I see little prospect for changing the process, so I’ll just try to explain it.
There is a fairly predictable dance that occurs each time the government approaches the statutory limit on debt held by the public: