Raise the Debt Limit, But Only to Finance Old Debt Service

 

Judging by the comments on Mollie’s post, the Ricochetoisie appears to condemn the McConnell plan for resolving the debt ceiling impasse as an abdication of responsibility.  Kevin Williamson over at NRO lays out an alternative, which to me at least, seems slightly more palatable.  But only slightly.

Congress should act now to pass a very narrowly tailored bill that would permit the issuance of new debt — but only for the purpose of financing current debt service….

Why pass such a bill?

First, because we have something on the order of $500 billion of debt to roll over in August. That doesn’t mean adding $500 billion to the national debt, but it does mean paying off old bonds and issuing new ones. If borrowing costs rise, which they very well may, that will mean adding modestly to the national debt. But it will take the possibility of a default entirely off the table. Talk of a pending U.S. default is mostly irresponsible grandstanding, but ensuring that we will meet our debt-service obligations removes a source of uncertainty from the markets and takes a powerful rhetorical tool away from the Democrats.

…Passing such legislation is good politics and necessary policy. If the Democrats were to take a stand against it, they would be in effect dragging the nation toward the possibility of default — a possibility I still regard as remote, but one that you don’t really want to take a single step toward.

The responses to Kevin’s post on NRO seem to suggest that National Review readers are on board with this plan, though they doubt something so “sensible” would get through Congress.  My hunch is that Ricochet readers wouldn’t like this idea, that you would much prefer to see the challenge dealt with head on with drastic spending cuts, or a balanced budget amendment, or some closed tax loopholes, or a combination of some or all of those things. Is that about right?  What say you of Mr. Williamson’s proposal?

There are 21 comments.

  1. Profile Photo Member

    It violates the Rahm Emmanuel principle: Never Let a Good Crisis Go to Waste. And so in that respect seems to be a missed opportunity. But if there was a way to craft it to actually suit that limited purpose, I wouldn’t regard a Yay vote as a black mark.

    • #1
    • July 13, 2011, at 10:54 AM PDT
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  2. The (apathetic) King Prawn Inactive

    I particularly like his third point that “such legislation would act as a practical spending cap until a long-term deal can be worked out.” It gets what we really want, spending caps, while preventing what we really don’t want, Obama’s demagogic default. Yes, it does kick the can down the road a little bit, but it removes the pressure do something stupid just to be seen doing something.

    • #2
    • July 13, 2011, at 11:02 AM PDT
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  3. DocJay Inactive

    Anything to shift the public perception away from the GOP as social security stealers is critical. The McConnell plan does just that as does this one.

    I really think this is a huge and critical fight over a relatively small amount of money compared to what is at stake in the long run and therefore winning this issue needs to be judged on the basis of who gets to decide our future in 2013.

    Medicare and Medicaid will crush our society more so than all other entitlements combined. Our country needs salvation from entitlements that project 50 trillion dollars over budget by 2050. The dems will always stand for looting the taxpayer in exchange for votes(as did Bush with his ridiculous Medicare part D fiasco).

    The bloated government also needs a massive haircut in every arena, sacred cows especially.

    The time to fight this is now but that is impractical. What this fight is about is weakening the president and having a platform(contract if you will) to build on for the 2012 run. If meaningful fiscal reform has to wait until 2017 then you can kiss any chance we have at ever achieving fiscal solvency goodbye.

    • #3
    • July 13, 2011, at 11:05 AM PDT
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  4. Aaron Miller Member

    McConnell’s plan is terrible. Williamson’s plan is the one worth pursuing.

    I’m not surprised. Kevin Williamson has been the most sound voice on the national debt for many months.

    • #4
    • July 13, 2011, at 11:20 AM PDT
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  5. LowcountryJoe Inactive

    Time to eat the peas! At some point we cannot be afraid to advocate for some sort of benefit cut to Social Security and Medicare. Raising the eligibility ages of both to mid to late 70s has to happen. If not now, when? It’s going to be much more painful the longer this goes on.

    • #5
    • July 13, 2011, at 11:30 AM PDT
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  6. Diane Ellis Contributor
    Diane Ellis Post author

    Interesting. So far I’ve been proven wrong. I’ve been under the impression that folks preferred to slam right into the ceiling to see what might happen over raising the ceiling under any circumstance.

    • #6
    • July 13, 2011, at 11:32 AM PDT
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  7. Sisyphus Member

    Sorry, Diane. It is better let the ceiling stand and press Obama and Geithner for misallocating what they have than confuse the issue with this move. The complaint that a default is forced is pure bullpucky. Geithner’s incompetence was well publicized before he was even confirmed. The President is already required to service the debt.

    • #7
    • July 13, 2011, at 11:33 AM PDT
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  8. DocJay Inactive
    Diane Ellis, Ed.: Interesting. So far I’ve been proven wrong. I’ve been under the impression that folks preferred to slam right into the ceiling to see what might happen over raising the ceiling under any circumstance. · Jul 13 at 11:32am

    I am fine with slamming in to the ceiling but not at the expense of leaving the critical choices needed to avert complete fiscal meltdown to Mr Obama in 2013. So whether either plan is adopted or not is not relevant to me as much as keeping public perception focused on conservative answers for our ills rather than what the media would have the sheep swallow for dinner.

    The financial crisis has not yet unfolded by any means. If we wait forever to really fix these entitlement programs they will be insolvent never to return. Someone will have to make very very hard decisions in 2013. We all know Mr Obama is incapable of doing what is needed to enact meaningful fiscal reform. 7/11 is the ledge where we stand but the horizon of 11/12 can be seen and an evil wind is blowing there without sanity to guide us.

    • #8
    • July 13, 2011, at 11:46 AM PDT
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  9. Joseph Stanko Member
    Diane Ellis, Ed.: Interesting. So far I’ve been proven wrong. I’ve been under the impression that folks preferred to slam right into the ceiling to see what might happen over raising the ceiling under any circumstance. · Jul 13 at 11:32am

    So what exactly does happen if we slam into the ceiling and the treasury runs out of money? If Congress does not pass any sort of deal, does that leave it entirely up to Obama to decide which bills get paid and which do not?

    Also, can the Fed simply print more money to pay the bills as it did in QE and QE2?

    • #9
    • July 13, 2011, at 11:51 AM PDT
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  10. Aaron Miller Member

    Diane, I have said before that I wouldn’t support raising the debt ceiling under any circumstances, but I support Williamson’s plan for two reasons.

    First, it says that these new loans can only be used to addressed current obligations and does not open the door to new spending. My primary concern has always been that raising the debt ceiling signals to politicians that they may keep spending.

    At least, that’s what the House proposal, should they take Williamson’s advice, would look like. If the Senate could change that provision and submit a revised bill to Obama without the House approving the change, I withdraw my support. My understanding is that such revisions could be approved by a committee instead of another full vote in the House. If so, and if we cannot trust those committee members to stand firm on this, I withdraw my support.

    Second, Democrats have the upper hand and are currently winning the media game, as always. Boehner demonstrated yesterday that he is not willing to speak the plain truth: that Obama isn’t seriously interested in the debt. Without honesty, Republicans need such a sacrifice to protect themselves politically.

    • #10
    • July 13, 2011, at 11:51 AM PDT
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  11. Western Chauvinist Member

    Strategically speaking, I wonder if it even a good idea for Republicans to get everything we want now. If the economy started a turn-around as a result, Obama would get the credit and would almost certainly win re-election. I know this puts conservatives in the position of looking like we’re hoping for failure, which is a very dangerous election year position to hold. However, the public intransigence on reforming entitlements indicates a little more pain may be required before the gain can be made.

    As the old Jewish curse goes, we live in interesting times.

    • #11
    • July 14, 2011, at 2:43 AM PDT
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  12. LowcountryJoe Inactive
    Joseph Stanko
    Diane Ellis, Ed.: Interesting. So far I’ve been proven wrong. I’ve been under the impression that folks preferred to slam right into the ceiling to see what might happen over raising the ceiling under any circumstance. · Jul 13 at 11:32am
    So what exactly does happen if we slam into the ceiling and the treasury runs out of money? If Congress does not pass any sort of deal, does that leave it entirely up to Obama to decide which bills get paid and which do not?

    Also, can the Fed simply print more money to pay the bills as it did in QE and QE2? · Jul 13 at 11:51am

    When I read this I immediately thought of a brief segment of this already short video (mm 0:25-onward).

    • #12
    • July 14, 2011, at 3:20 AM PDT
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  13. Bruce in Marin Member

    This proposal sounds good to me, but I’m not sure it solves the problem that congressional Republicans seem to be worried about. The public seems not to believe particularly that not raising the debt ceiling will cause us to default. However, apparently the public does believe that Social Security checks will cease on or after Aug 2. I say “apparently” because it’s hard for me to accept that anybody really thinks this would happen, but judging by the desperate smell of the McConnell proposition, that’s what our guys are terrified about.

    So unless you can somehow tweak this idea so as to guarantee benefits continue to flow, I wouldn’t expect to see any great movement towards it in Congress.

    • #13
    • July 14, 2011, at 3:59 AM PDT
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  14. DocJay Inactive
    Joseph Stanko
    Diane Ellis, Ed.: Interesting. So far I’ve been proven wrong. I’ve been under the impression that folks preferred to slam right into the ceiling to see what might happen over raising the ceiling under any circumstance. · Jul 13 at 11:32am
    So what exactly does happen if we slam into the ceiling and the treasury runs out of money? If Congress does not pass any sort of deal, does that leave it entirely up to Obama to decide which bills get paid and which do not?

    Also, can the Fed simply print more money to pay the bills as it did in QE and QE2? · Jul 13 at 11:51am

    Did you see Ben B suggesting QE3 today. I cant close my eyes and make him away.

    • #14
    • July 14, 2011, at 4:31 AM PDT
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  15. David John Inactive

    The Moody’s threat of downgrade a few minutes ago makes me fret.

    The debt limit is routinely raised. What is different this time around? It’s the Tea Party that’s new. Anything bad that comes out of being confrontational will be laid at the feet of the Tea Party.

    Let’s cool it, for now. Let’s be vocal, very vocal, that’s all. This is a time to roll with the punch.

    • #15
    • July 14, 2011, at 4:51 AM PDT
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  16. Aaron Miller Member

    I’m not certain about my position, by the way.

    As King Prawn pointed out in another thread, Democrats in local governments often cut vital services (like police and fire department budgets) while leaving peripheral services intact so that they can pretend Republicans are wicked and cutting spending is always bad. Obama would do the same thing on a national scale.

    A firm debt ceiling should force cuts, but it won’t. It won’t because Democrats are not seriously interested in the well-being of their constituents. They seek power above all else.

    Republicans are stuck between a rock and a hard place… and they lack the integrity to convincingly explain to voters how they got there.

    • #16
    • July 14, 2011, at 12:01 PM PDT
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  17. Bereket Kelile Member

    I thought it was strange that McConnell offered such a plan after (or was it before?) slamming Obama on the Senate floor when he said that we’re not going to get anywhere as long as he’s in the oval office. It seemed like he was attacking and retreating simultaneously.

    • #17
    • July 14, 2011, at 12:03 PM PDT
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  18. Hang On Member

    What can you get with the cards you hold; and more important, how can you improve your position so that you can get more in the future. These negotiations are not so much about the debt limit. They’re more about the 2012 election.

    The Republicans can never be seen to cave on tax increases — so Brookes and Murphy were dead wrong. Rolling over the debt (Williamson’s proposal) and McConnell’s idea are ways of effectively shifting focus back onto Obama and his failures. So either is acceptable.

    • #18
    • July 14, 2011, at 12:04 PM PDT
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  19. No Caesar Thatcher

    Williamson’s plan is the best, realistic option now. But save it for July 27th.

    These are monumentally high stakes, we are in (political) total war. Face it, the Democrats have gotten away with no budget for over a year, they can get away with turning this blame on the Republicans. I am not confident the GOP has the PR skills and strength to successfully pin the blame where it belongs, on the Democrats in general and Obama in particular. This President will never agree to an honest solving of our structural problems.

    Therefore, for the next 1.5 years we must focus on first, preventing further harm being done by the Democrats and second, amassing the ammunition to replace Obama and elect a strong GOP Senate majority in ’12. In my mind, the worse case is Obama partially capitulating, forcing the GOP to go along with a “sour peas” deal. Then he can claim the “reasonable/responsible” mantle for ’12, while just kicking the can down the road and cementing in place Obamacare and the enormous spending jump by the 2006-10 Democrat Congress. Fixing will be more painful then.

    A tactical retreat/stalling action is in order now.

    • #19
    • July 14, 2011, at 12:15 PM PDT
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  20. No Caesar Thatcher

    Remember, in 2012 Obama will be the devil-we-know to “swing voters”. If the devil-we-know is a disaster, but the opposing candidate looks anything other than reassuring, promising and safe, an awful lot of lemmings will go with the familiar failure… and take us over the cliff with them.

    • #20
    • July 14, 2011, at 12:19 PM PDT
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  21. DocJay Inactive

    No Caesar

    I agree with all of your points to the core except that I like the timing now instead of the 27th. Front page headlines involved SS checks and since Mr Boehner will not stand up and call the POTUS a liar, then alternatives that sound good to the public needed to be broached ASAP. The new age of media moves very very fast and facts are not always needed. I think something had to be done and was.

    Any plan shows the American public the GOP is not being intransigent. The fact that Mr Obama will probably not accept either makes it all the better.

    • #21
    • July 14, 2011, at 12:40 PM PDT
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