Capitol Hill

How Congress Wrecked a Smart Debt-Ceiling Fix


Richard Gephardt, in 1987

Photograph by Terry Ashe/Time Life Pictures via Getty Images

Richard Gephardt, in 1987

The most infuriating part of the fiscal-cliff debate was that the whole construct was phony, a threat devised by Congress to force itself to reduce the deficit. The coming debt-ceiling crisis is much worse and even more infuriating. It too is a creation of Congress—but one that came into being when members, for partisan purposes, deliberately broke an easy way of raising the debt limit that had worked for years.

Through a quirk of history that dates back to World War I, the U.S. has a two-step budget process. First, Congress passes a budget resolution that determines how much money will be spent. Then it raises the debt ceiling to accommodate that spending. This creates an opportunity for grandstanding that politicians in both parties (including a former senator named Barack Obama) have found irresistible: They can vote for whatever programs they like in the budget resolution, then turn around and pose as heroic stewards of the public purse by refusing to raise the debt ceiling to pay for them, with most voters none the wiser. This ritual has frustrated political leaders for generations. Fifty years ago, Douglas Dillon, President Kennedy’s Treasury Secretary, griped: “[L]et no one labor under the delusion that the debt ceiling is either a sane or an effective instrument for the control of federal expenditures.”

In 1979 the problem was solved by a young Democratic congressman from Missouri, Richard Gephardt, who had the thankless task of rounding up votes to raise the ceiling. “We were in charge of Congress, but nobody ever wanted to vote for it,” Gephardt told me in a 2011 interview. “Republicans wouldn’t give us votes, so it was our responsibility. Every time it came up I had to go to every member and seek their vote. It was painful and difficult and, I thought, unnecessary. I’d say, ‘Did you vote for the appropriations bill? The defense bill? The highway bill?’ They’d all say yes. And I’d say, ‘Well, then you gotta pay the bill.’ ”

Gephardt, who would later become House Democratic leader and twice run for president, devised a simple fix that met the absurd requirement of a two-step process. With help from the House parliamentarian, he established the Gephardt Rule, which decreed that when Congress adopted a budget resolution (the first step) it was automatically “deemed to have passed” a commensurate increase in the debt limit (the second step). Presto. Problem solved.

The Gephardt Rule held for a decade and a half, during which there were no fights over raising the debt ceiling. But when Republicans took control of the House in 1995, they killed it. “It was a very clever idea,” Newt Gingrich, the GOP speaker at the time, recalls. “But we wanted to go back to the discipline of reminding the country that it was getting in debt.”

Gingrich thought the second vote was a good pressure tactic to limit spending. Yet the threat of debt default didn’t work because nobody took it seriously. What’s different now is that many Republicans seem willing to follow through. Even Gingrich is worried. “You can’t risk default,” he says. “I don’t think this is a good place to force the issue.” Still, he doesn’t regret doing away with the Gephardt Rule. “I would favor raising the debt ceiling for only three months at a time as a reminder to Congress as it goes through the appropriations process that you want to minimize the future debt,” he says.

Of course, doing that would ensure a permanent state of crisis. Gingrich doesn’t mind that either. “Democrats wouldn’t like it because raising the debt ceiling would be so difficult,” he says. “But we won’t mind it being difficult, because we’re the party that doesn’t like debt.”

The bottom line: When Republicans won the House in 1995, they revoked an orderly process to raise the debt ceiling, setting up the current crisis.

Green_190
Green is senior national correspondent for Bloomberg Businessweek in Washington. Follow him on Twitter @JoshuaGreen.

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